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Oil Price Outlook Indicates Downtrend

Based on recent developments in the industry and global economy, we are maintaining our 2019 forecast for the average price of a barrel of oil at $57 for West Texas Intermediate crude. That's near the current price but down from 2018. We are maintaining our preliminary 2020 forecast of $53 per barrel. In the spring of 2019, oil prices surged before pulling back on fears that trade wars will result in a global economic slowdown. Looking into 2020, we expect more volatility but generally think the direction in prices is down as forecasts for the date of Peak Oil loom. Our range through 2020 is $70 on the upside and $45 on the downside, based on several inputs, including conversations with industrial and energy company managements and the activity of traders (who generate futures prices and the forward curve). The forecast range also is influenced by global demand growth, sharply increased domestic supply, and OPEC pronouncements. Given the volatility in oil prices, our investment recommendation on the Energy sector is Under-Weight. Within the group, we favor companies with a high exposure to U.S. production (particularly in the Permian Basin in Western Texas, where production can be profitable with prices in the low $50s), as well as companies with a history of growing dividends. ...  in prices is down as forecasts for the date of Peak Oil loom. Our range through 2020 is $70 on the upside and $45 on the downside, based on several inputs, including conversations with industrial and energy company managements and the activity of traders (who generate futures prices and the forward curve). The forecast range also is influenced by global demand growth, sharply increased domestic supply, and OPEC pronouncements. Given the volatility in oil prices, our investment recommendation on the Energy sector is Under-Weight. Within the group, we favor companies with a high exposure to U.S. production (particularly in the Permian Basin in Western Texas, where production can be profitable with prices in the low $50s), as well as companies with a history of growing dividends.   more

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