RayJ's Forecast | Russell T. Rudy Energy LLC
Investment firm, Raymond James (RayJ), recently issued their A & D (Acquisition and Divestiture) Quarterly for the fourth quarter of 2015. It contains a retrospective of last year, and more importantly, their price forecast for 2016.
RayJ sees the first half of 2015 in a positive light, but rising supply, concerns about falling demand, and lack of storage capacity plagued the last part of the year. Production in the U. S., Iraq, and Saudi Arabia all contributed to the oil glut. This, in conjunction with concerns regarding the removal of sanctions on Iranian crude, caused the market to anticipate further oversupply. Concerns about a slowing Chinese economy, and diminishing storage capacity also put downward pressure on prices in the second half of 2015.
The investment firm anticipates declining production both domestically and internationally in 2016. This, in turn, should reduce global inventories by mid-year. Solid world-wide demand growth will also contribute to an undersupplied market and price recovery. Consequently RayJ foresees an average of $50 for West Texas Intermediate next year, and $70 by year-end.
The firm is less bullish on natural gas prices in 2016. They anticipate that an average price of only $2.00 will result in the rig count falling further and faster than is generally believed. RayJ also predicts that oil and gas stocks will bottom out with oil prices, well before this is reflected in earnings estimates.
Finally, the firm sees key sensitivities to their forecast as Mideast tensions, non-OPEC foreign production, storage capacity, and the strength of the dollar.
