Medium-Term $100 Oil Forecasts Are For Paper Traders And Fantasist Bulls Only

Medium-Term $100 Oil Forecasts Are For Paper Traders And Fantasist Bulls Only

Oil pumping jacks in an oil field in Russia. Photographer: Andrey Rudakov/Bloomberg There's the physical crude oil market and then there's the 'paper' or electronic futures market. A disconnect that's sometimes huge, and at other times negligible, almost always exists between the two. However, the chatter we've heard since November 2020 has really taken the disconnect to a whole new level and appears out of step with market fundamentals. From $40 per barrel levels back then for Brent and WTI futures, we are now at over $60, and even briefly touched $70 in March. The reasons assigned to the price surge by bullish traders range from expectations of a global economic recovery to COVID-19 vaccine rollouts. Such bullish calls reached a crescendo after a decision by OPEC+ on March 4 to keep their headline production cut level at 7 million barrels per day (bpd), along with an additional and surprising voluntary cut of 1 million bpd by Saudi Arabia alone. However, Russia and Kazakhstan were allowed to marginally increase their output to keep the OPEC+ peace. They call it the oil 'supercycle' - one that will be created by chronic underinvestment in upstream oil and gas projects, short-sighted ESG ('Environmental,