Oil To $70? Or Down To $30?
Oil To $70? Or Down To $30?
Will oil prices rise to $70 per barrel this year or fall to $30? Depends on who you ask.
Oil price forecasts are always all over the map, but the exceptional disparity between some projections for 2017 is pretty stunning. On the one hand, you have Citibank, which sees oil shooting up to $70 this year as supply continues to tighten even as demand rises.
Citi acknowledges the headwinds in the near-term. "Oil prices are not likely to stray far from their current $53-58 per barrel range in the near term as record investor net length and bearish inventory data will likely cap prices until more tangible evidence of a tighter market emerges," Citi analysts wrote in a recent research note. However, they see oil prices posting much stronger gains in the second half of the year.
But the bearish threats to oil prices on the downside seem to be a lot more visible right now than the bullish ones. Aside from rising shale production, a dagger looms over oil prices in the very near-term. Hedge funds and money managers have pushed bullish bets to a new record high, equivalent to over 1 billion barrels of oil. The massive one-sided bet leaves the oil market dangerously exposed. When the herd suddenly realizes that they are all making the same bet, there could be a stampede back in the other direction. The buildup in bullish bets is all the more remarkable because it occurred at a time when oil prices were stagnant, stuck in the mid- to low-$50s per barrel.