Fundamental Forecast for USOIL: Bullish

Crude Oil Price News Talking Points:

Will they or won’t they? That is, will US Shale producers out produce OPEC and strategic alliances that agreed to a production cut in 2018 in such a manner that the agreement loses its positive effect? If you asked the two most credible entities in the oil market about their views, you would hear different answers.

A Market (Forecast) Divided

In the prior week, two energy market giants, OPEC and the EIA, have differing views on the strength of demand and how that will affect whether the oil market will continue to be oversupplied or should demand rise strongly enough next year in whether the market will be in a deficit.

The OPEC view is that their efforts will pay off and they will have finally cleared through the supply glut whereas the EIA sees US production as too aggressive to win the war so that the progress made in eliminating the glut next year will be negligible. Naturally, which forecast is right whether it is glut eliminated or glut remaining in force will significantly determine how the price of oil will end 2018. Either way, traders can expect volatility to increase as positioning is likely to be spread around and whoever is wrong may need to aggressively shift their exposure if they followed the wrong forecast.

A side note worth considering is that options traders seem to favor OPEC’s view. When looking at ICE Brent $80 call options for June 18 onward, the volume surged this week to over 30,000 contracts, which would be good for a

Hey, Did You See That Crack?