Could Oil Prices Crash In The Fourth Quarter?

Could Oil Prices Crash In The Fourth Quarter?

Share to Linkedin Although the futures strip doesn't reflect it, many anticipate a much tighter oil market in the fourth quarter. Jeff Currie of Goldman Sachs has predicted that prices will reach $110 by the third quarter, in line with the IEA's expectation that the market will tighten significantly then, as the figure below shows. Essentially, the world will need to either draw down inventories by 1. 6 mb/d in the second half of this year, or OPEC+ must increase production by that much, or prices will rise if the IEA's expectations prove out. Ay, there's the rub, as Hamlet said while barbequing. The IEA, like all others making short-term forecasts, has to make numerous assumptions about the behavior of various governments which greatly multiplies the uncertainty about the market balance. The table below shows the projected changes for the major variables. Most noteworthy: expectations of a decline in 1 mb/d from Russian oil, which is based on the assumption that sanctions and the price cap will reduce their sales. So far, that appears questionable, in which case the balance would be much less tight. One little noticed development is the change in drilling in countries like Angola and Nigeria.