HAVE YOU HUGGED A FRACKER TODAY? Oil Forecast to Fall Sharply if OPEC Doesn’t Extend Production Cuts.
Oil markets have largely priced in an extension to the deal struck between OPEC, Russia and other producers late last year.
If that deal isn’t extended, prices could drop below $40, a level not seen for over a year, some analysts say.
If the output cuts are extended when the Organization of the Petroleum Exporting Countries and other suppliers meet on May 25, oil prices would rise to $60 a barrel by the end of the year.
“The market appears to have largely priced in an extension to the output-cut deal,” said Warren Patterson, commodity strategist at ING Bank. “This is a significant risk for the market, with no deal likely to lead to an aggressive selloff.”
Brent crude will average at $57 a barrel this year, reaching $60 in the fourth quarter, according to a poll of 14 investment banks surveyed by The Wall Street Journal in late April. That is broadly unchanged from the previous survey. The banks expect West Texas Intermediate, the U.S. oil gauge, to average $55 a barrel this year.
In early Wednesday trade, Brent was trading at $50.80 a barrel, while WTI was changing hands at $47.90 a barrel.
Supply could be increasing just in time for the annual summertime demand spike, and frackers are in better financial condition today than they were in 2014 when the last glut began.