Oil & Gas Price Outlook November 2016

Industry Survey Results Compared to Futures Pricing

The investment bank Credit Suisse recently surveyed a group of 128 investors on their outlook for oil prices in February 2018. According to the report, the survey group was comprised primarily of “Long Only” investors, hedge funds and energy companies. A summary graph of their responses is presented below. Oil & Gas Price Outlook November 2016

Oil & Gas Price Outlook November 2016

These results indicate that the average expected value is +/- $45/BBL for February of 2018.

Also, this price distribution from the survey closely approximates that shown in the NYMEX oil futures (/CL), and their option-driven probabilities that we discuss further below.

Oil & Gas Price Outlook November 2016

Crude Oil Outlook

While futures markets aren’t a crystal ball, their price levels and related options are useful for estimating future ranges or “confidence intervals” for crude oil and natural gas prices.

The graphic below shows the crude oil price on November 4, 2016 and predicted crude oil prices based on options on oil futures contracts (ticker /CL).  The blue lines are within one standard deviation (σ) of the settlement price (green line) and the red lines are within two standard deviations for each month (for a refresher on standard deviations, see the January 2016 blog).

Oil & Gas Price Outlook November 2016

Based on the November 4, 2016 prices, the markets indicate that in mid-December 2016, there is about a 68% chance that oil prices will be between $38.50 and $51.00 per barrel. Likewise, there is about a 95% chance that prices will be between $32.00 and $58.50.  For a longer-term view, by mid-April 2017, the +/- 1σ price range is $36.50 to $60.50 per barrel, with an expected value of $47.07.

Natural Gas Outlook

We can do the same thing for natural gas futures, currently trading at $2.78 per MMBTU on the Henry Hub (ticker /NG).  Although more affected by seasonal factors than crude oil, in December 2016, the +/- 1σ price range is $2.45 to $3.65 per MMBTU and the 2σ range (95%) is $1.95 to $4.85 per MMBTU.  The expected value of natural gas prices is $2.95 for the end of 2016.


Tags: Oil & Gas Price Outlook November 2016, Oil Price Outlook Nov 2016, Gas Price Outlook Nov 2016, Natural Gas Outlook Nov 2016, Crude Oil Outlook Nov 2016

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