WTI crude oil is currently trading at $46.43 per barrel, for delivery in August 2017. Brent crude oil is trading at $48.84 per barrel, for delivery in September 2017. These figures are a stark reminder of how far crude oil prices have plunged over the past 52 weeks. Consider that WTI crude oil hit a high of $58.30 per barrel, while Brent crude oil was trading at a 52-week high of $60.18 per barrel. These numbers are part of a long-term unfolding trend. The ongoing rivalry between WTI crude oil producers and OPEC is depressing oil markets.
For example, the US rig count (July 14, 2017) was recorded at 952, up 0 from the previous count on July 7, 2017. The change from July 15, 2016 is 505. If we turn our attention to Canadian oil rigs, the July 14, 2017 rig count is 191, up 16 from the prior rig count on June 7, 2017, but up 96 rigs from July 15, 2016. This information was provided courtesy of Baker Hughes, a GE Company. Oil rig counts are especially important when it comes to determining oil prices. The more rigs in operation, the lower the oil price.
What Is the Short-Term Outlook for Crude Oil?
Analysts across the board have adopted a cautious tone when it comes to forecasting oil prices. On Tuesday, July 11, 2017, oil prices dropped as worldwide oversupply continued. Naturally, banks and financial institutions revise their outlook on oil prices sharply lower. Since then, we’ve seen China increasing its demand for crude oil and this has helped prices to rise towards the critical $50 per barrel for Brent crude oil. One of the leading authorities on crude oil, Samson H. Armstrong of Saxon Trade believes that the fundamentals of oil are weak. Mr. Armstrong commented on recent trends,
‘We are hearing a lot of chatter in the financial markets… It’s not good for crude oil. BNP Paribas cut its Brent crude oil forecast to $51 per barrel for 2017, and slashed its forecast for 2018 to just $48 per barrel. This does not bode well for black gold, and it is reflected in futures markets where prices are sharply lower.’
Mr. Armstrong was quick to counter that analysts were speaking strategically, and that short-term appreciation in crude oil prices is entirely possible. ‘…Consider that the US summer season is underway. We are seeing surging levels of gasoline demand as tourists take to the roads. But we could be seeing demand tapering off as the school holidays approach their end.’ There is considerable worry that OPEC is unable to prevent the sliding crude oil prices, despite its many meetings and promises of cutting production. Currently, the price of crude oil is approximately 18% lower than the opening price at the beginning of the year.
What Other Factors Are Affecting Crude Oil Prices?
Recently, the chief executive officer of Shell announced that oil consumption could drop off dramatically in 25 years. The bombshell announcement by Bob Dudley of British Petroleum was surprising and shocking. He gave a precise date for crude oil’s demise – June 2, 2042. This date dovetails with the reports from BPs Energy Outlook vis-à-vis crude oil maxing out in 25 years. Crude oil companies have been extremely busy with increasing supply, but the advent of electric cars could upend all of their ambitious plans.
Consider that there are major changes already underway in the world. These include Volvo’s announcement that as from 2019 it will only be manufacturing hybrid or electric vehicles. On 8 July 2017, France announced that no gasoline or diesel cars would be sold as from 2040. Bob Dudley’s announcement was echoed by the chief executive officer of Royal Dutch Shell who was even more pessimistic about the date at which oil prices would max out – by 2032. Many industry executives believe that oil’s heyday is over, and that the rampant bullishness of oil markets is a thing of the past.
Oil and Gold Appear Bearish
While oil may be hitting the skids, gold bullion is not performing any better. The precious metal broke through the critical $1,300 per ounce barrier in recent weeks, but has since retreated to the low $1,234.60 level (July 17, 2017) as US economic performance and the USD improves accordingly. Investors are naturally concerned about the direction of market movement, given that a recent tech selloff of the NASDAQ was reversed by a risk-on approach to equities markets after the June NFP data was released. Safe-haven assets such as gold are still preferred by many investors, in different forms such as gold ETFs, gold stocks, Gold IRA investments, and the like. Futures markets are certainly bearish for gold, but that could turn at a moment’s notice.