Oil is getting ever closer to $50. Many analysts think $50 is baked in. Here are some of the reasons why $50 looks like a sure thing.
Today, May 25th, we’ve seen the price get ever so close to $50. The overriding reason for this price rise is the drawn down of inventories. The past week’s drawn down was the first since 2014. Some think these drawn downs will continue. Hence, the rational for $50 or higher oil is based on declining inventories. We’ll have to continue to monitor inventory levels.
In our Upstream PA 2016 Seminar, a representative from EIA told everyone the best way to monitor pricing for oil and NatGas is to watch inventories. Inventories certainly drove the market today.
Let’s look out over the next few months. Our observations:
- Based on current pricing trend, we’ll get to the mid $50’s in pricing relative soon.
- At the price in the mid-$50’s, we could see the rig count climb. We monitor the land rigs weekly in our Facts & Rumors Newsletters. In my opinion, the rig count has somewhat stabilized. It’s going down, but only by approximately 5 rigs a week. It will be interesting to see if the rig count turns around in the next few weeks.
- There is general consensus that oil could be at $60 by the end of the year. The reason why
- It will be driven by speculation.
- Many speculators are net long which means there will be funding for expansion.
At the present time, it is possibly the best outlook for oil in months. Be aware. OPEC meets next month.