With unprecedented volatility in the global energy market, Stratas Advisors’ Short-Term Outlook offers clarity and understanding during a time of turmoil. After accurately predicting both the 1Q2016 price bottom and the net impact of the recent OPEC meeting in Doha, Stratas Analysts predict oil prices will slowly rebound through the end of 2017. For decision-makers, this influences short-term planning on capital allocation like rig deployments, investment strategy and managing cash flow.
The Short-Term Outlook has quarterly price forecasts for the next 24-months that cover pricing, key drivers and market fundamentals for the entire energy value chain. The web-based interface combines sophisticated modeling techniques with decades of market experience. The latest update gives insights on global crude and regional petroleum products, global LNG, U.S. natural gas and natural gas liquids (NGLs), as well as global biofuels.
Some key findings include:
Stratas Advisors accurately predicted the price bottom for 1Q2016. Our forecast was less than $0.50/bbl off from actuals, as shown in the attached image.
Global oil demand is expected to rise 900 mb/d in 2016, 800 mb/d lower than growth seen in 2015. Lagging demand combined with persistent supply will result in Brent crude prices at $50/bbl by the end of 2017.
With Russia and Saudi Arabia operating at close to full capacity and production freezes or cuts not in the interest of supply growth markets like Iran and Iraq, Stratas Advisors holds firm that the April OPEC meeting in Doha is unlikely to yield any material change to short term supply.
Asian light/heavy product differentials will increase by $4/bbl year-on-year due to lagging demand for residual fuel oil versus continued growth in gasoline and diesel. U.S. NGL markets are expected to remain weak in 2016, with Y-grade prices averaging $1 lower per barrel than prices seen in 2015.
Henry Hub prices will also struggle to clear $3 per mmbtu throughout the forecast period due to continued oversupply in the U.S.
Asia’s LNG prices will remain between $8/mcf and $10/mcf due to increased availability of global imports from the U.S. and Australia.
U.S. ethylene prices will drop by 6.1 percent by 2017 because of lagging global demand combined with continued access to low-cost feedstock.
Gasoline crack spreads in the U.S. are likely to decrease by roughly $4/bbl by the end of 2016.
Source: Stratas Advisors