When it comes to oil price forecasts, there isn’t a lot of optimism out there. Oil prices are still down 40% from last June, the Organization of the Petroleum Exporting Countries (OPEC) continues to glut the market with oil, and global economic growth has pretty much flatlined. Currently at around $60.00 per barrel, where will oil prices go in July and the second half of the year? Most indicators suggest that oil is going to find a home in the $60.00 range for a long, long, time.
July Oil Price Forecast for Bears
If you were bearish or bullish on crude oil prices in the past, chances are you’re feeling pretty neutral right now. West Texas Intermediate (WTI) crude oil prices are trading at around $60.00 per barrel; a tight range that has been in place since the beginning of May.
It seems there is no incentive for oil prices to go higher. In early June, OPEC said it would continue to flood the world with oil it doesn’t really need.
The cartel said it would keep its crude oil output at 30 million barrels a day; arguing it doesn’t really care about the price of oil. No, OPEC is more concerned about maintaining its market share—no matter what. As a side note, its output also keeps U.S. shale production in check.
Speaking of keeping oil production in check, OPEC could raise its daily output without any scrutiny. That’s because individual countries haven’t had quotas since 2012, so the 30 million barrel per day target is going to be pretty difficult to enforce. Sure, it’s one thing to worry about the U.S. shale industry and influx of American oil. But when it comes from your own backyard, why worry?
So what about OPEC’s daily output? Iranian Oil Minister Bijan Namdar Zanganeh said his country would be ready to pump four million barrels a day; the same level from around 2008 before Western sanctions.
Suffice it to say, it doesn’t take a lot of oil to turn the market. In fact, some estimates are as low as 500,000 barrels per day. Iran pumped out 2.8 million barrels a day in May. An extra 1.2 million barrels would certainly be felt on the global markets. Unless of course, OPEC made room for Iran. But is Saudi Arabia going to cut its own production to make room for Iran?
July Oil Price Forecast for Bulls
Even declining commercial crude oil stockpiles aren’t enough to shake oil prices for more than a day or so. On Wednesday, the U.S. Energy Information Administration (EIA) reported that the U.S. commercial crude stockpile fell by 4.9 MMbbls (million barrels) in the week ended June 19, 2015. Analysts were expecting a decline of 1.8 million. This represents the eighth straight week that U.S. oil inventories fell. (Source: eia.gov, June 24, 2015.)
Does this mean there is increased demand or just less oil out there?
Regardless, crude oil prices remain near $60.00 per barrel. And barring an extreme, unexpected event; will stay in that range. At least for now.
Long-Term Outlook for Oil Prices
Responding to complaints from some OPEC countries that oil in the $60.00 per barrel range was inadequate, Mr. Badri, the Secretary General of OPEC, said, “We have rich and poor countries, no doubt about it. For the last four or five years we have been enjoying a very good income; but the reality is that we cannot have this $100 anymore.” (Source: nytimes.com, June 5, 2015.)
As it stands, oil futures are not very volatile right now. Crude oil futures contracts for August are at around $59.60 per barrel; December contracts are just $60.85. Oil futures contracts for December 2016 aren’t a lot higher at $62.72. In fact, oil futures contracts will continue to trade in the mid-$60.00 range until 2020. (Source: barchart.com, last accessed June 25, 2015.)
Granted, anything can happen and oil futures could fluctuate significantly in either direction. But right now, the outlook for crude oil prices is not optimistic.