Tag: WTI Crude Oil

WTI and Brent Crude Oil’s Prices Continue to Diverge

Over the last week, WTI oil prices have increased between $2.00 and $3.00 per barrel and Brent Crude prices have increased by $3.00 to $4.00 per barrel.  The increase in the Brent (North Sea) oil prices was in part due to a supply disruption in the North Sea, expected to trigger further reductions in global oil inventories.¹  Around 450,000 barrels a day of North Sea output is shut off for the coming couple of weeks due to a leak in the Forties Pipeline System.²

The North Sea issue exacerbated the already historically wide spread between Brent and WTI as U.S. oil prices are being kept in check by rising shale production. Over the last year, Brent has typically been priced about $3.00 per barrel more than WTI prices.  The pricing differential is now approximately $6.00 per share (with a peak of $7.49 per barrel) on Tuesday.

Brent Oil Prices Less WTI Prices Per Barrel (Last Week)

OPEC’s production level fell to its lowest in six months while U.S. production was surging faster than expected, meaning oil markets may not rebalance before the end of 2018, the oil cartel said Wednesday in its closely watched monthly oil report.  However, the main driver in non-OPEC output comes from the U.S., where production is expected to grow 1.05 million barrels a day in 2018.³

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 crude oil price as of December 15, 2017 and predicted crude oil prices based on options on oil futures contracts (ticker /CL).

On the graphic below, 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).

Based on December 15, 2017 pricing, the futures markets indicate that in mid-February 2018 the expected price is $57.23 with a 68% chance that oil prices will be between $52.00 and $62.00 per barrel. Likewise, there is about a 95% chance that prices will be between $46.00 and $69.50.  For a longer-term view, by mid-May 2018 the +/- one standard deviation price range is between $48.50 to $63.00 per barrel with an expected value of $56.83.

Natural Gas Outlook

We can do the same thing for natural gas futures, currently trading at $2.71 per MMBtu on the Henry Hub (ticker /NG).  Although more affected by seasonal factors than crude oil, in February 2018, the expected price is $2.72 with a +/- 1σ price range of $2.25 to $3.35 per MMBtu, and the 2σ range (95%) of $1.85 to $4.75 per MMBtu.  For a longer-term view, by mid-May 2018 the expected price is $2.65 per MMBtu with a +/- one standard deviation price range is between $2.25 to $3.15 per MMBtu.

1. Sarah McFarlane, Wall Street Journal, Dow Jones Newswires 12-13-17 0658ET, Copyright (c) 2017 Dow Jones & Company, Inc.

2. Ibid.

3. Benoit Faucon, Wall Street Journal, Dow Jones Newswires 12-13-17 0720ET, Copyright (c) 2017 Dow Jones & Company, Inc.

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Tags: Oil & Gas Price Outlook December 2017, Gas Price Outlook December 2017, Oil Price Outlook December 2017

 

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Lower Crude Futures Driving S&P 500 Declines

Stocks around the world extended losses Wednesday, affected by lower commodity prices and a weaker dollar.  A key factor in this week’s 3% fall in crude prices was the American Petroleum Institute’s “surprise” report that U.S. inventories had increased in crude oil and gasoline.

The IEA also cut its forecast for oil prices to $83 per barrel for 2025 from $101 previously, reflecting increased future supplies.  However, the resulting lower oil and gas prices are expected to help sustain global consumption to 2035, despite growing popularity of electric vehicles.¹

In the equity markets, energy and materials companies have led losses in recent sessions.² As oil prices fall, some investors also worry that lower oil prices could lessen investment plans from the energy sector into other parts of the economy.  In the U.S. “essentially all investment we have seen recently appears to have been driven by the energy sector,” according to strategists at UBS.³

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 crude oil price as of November 15, 2017 and predicted crude oil prices based on options on oil futures contracts (ticker /CL).

On the graphic below, 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).

Based on November 15, 2017, pricing, the futures markets indicate that in mid-December 2017 the expected price is $55.40 with a 68% chance that oil prices will be between $51.00 and $59.50 per barrel. Likewise, there is about a 95% chance that prices will be between $45.50 and $66.50.  For a longer-term view, by mid-April 2018 the +/- one standard deviation price range is between $46.50 to $63.00 per barrel with an expected value of $55.72.

Natural Gas Outlook

We can do the same thing for natural gas futures, currently trading at $3.13 per MMBtu on the Henry Hub (ticker/NG).  Although more affected by seasonal factors than crude oil, in December 2017, the expected price is $3.12 with a +/- 1σ price range of $2.75 to $3.85 per MMBtu, and the 2σ range (95%) of $2.35 to $4.75 per MMBtu.  For a longer-term view, by mid-April 2018 the expected price is $2.95 per MMBtu with a +/- one standard deviation price range is between $2.45 to $3.45 per MMBtu.

1. Seeking Alpha, Nov. 13, 2017, Carl Surran

2. Charts taken from Investing.com, November 15, 2017

3. Dow Jones Newswires, 11-15-17, Riva Gold and Kevin Kingsbury

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Tags: Oil & Gas Price Outlook November 2017, Gas Price Outlook November 2017, Oil Price Outlook November 2017

 

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Electric Cars Impact on Oil?

The electrification of powertrains continues as automakers roll out everything from subcompact compliance cars to electrified supercars to improve efficiency and optimize power. Tesla’s Model 3 is just the prong on the charge cord of available plug-in vehicles. BMW, Mercedes-Benz, Ford, Volkswagen, Volvo, and Hyundai have all announced electrification plans for dozens of vehicles by 2020. Plug-in sales have grown 32 percent annually since 2013 (41 percent globally), and most autonomous vehicle plans are based on electric cars. General Motors plans 20 electric vehicles in the near future and plans to scrap internal combustion engines entirely as soon as 2030.¹

Worldwide, the global electric car stock surpassed 2 million vehicles in 2016 after crossing the 1 million threshold in 2015.²

Not so long ago, minuscule sales of EVs made it hard for big oil to take the threat of electric cars seriously. Now, thanks to growing demand in Asia and Europe, the question facing experts is no longer whether EVs will take over, but when?

Economic Comparison

Economics are driving the change to electric. Now that prices for electrics are coming into line with gasoline-powered vehicles, operating cost differentials favor electrics. Take for an example a hypothetical gasoline powered car with 20 miles per gallon efficiency. With gasoline at $2.50 per gallon, it would cost $12,500 for gasoline fuel to drive 100,000 miles. For electrics, the “energy consumption rate” is expressed as “kWh per 100 miles (kWh/100m)”. This figure is listed on the EPA’s EV fuel economy label and the US federal government’s fueleconomy.gov Web site. Although retail residential electric rates vary, 12.5 cents per KWH is a about the US’ average. At a rate of 35 kWh/100m for some Tesla models, this equates to $4,375 for the electric car to travel the same 100,000 miles. This equates to a 65% savings. Of course, range restrictions and access to charging are still constraints for electric vehicle operations.

Potential Impact on Future Oil Demand

Bloomberg’s New Energy (“NEF”) expects electric cars to outsell gasoline and diesel models by 2040, reflecting a rapid decline in the cost of lithium-ion battery units that store power for the vehicles. It expects 530 million plug-in cars on the road by 2040, a third of the worldwide total number of cars.³

A Barclays’ analysis concluded that oil demand could be slashed by 3.5 million barrels per day worldwide in 2025. If electric vehicle penetration reaches 33 percent, oil demand could shrink by a whopping 9 million barrels per day by 2040, Barclays concluded.⁴ Bloomberg’s New Energy Finance puts the number at 8 million barrels by 2040, more than the “current combined production of Iran and Iraq,” they note.

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 crude oil price as of October 16, 2017 and predicted crude oil prices based on options on oil futures contracts (ticker /CL).

On the graphic below, 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).

Based on October 16, 2017, pricing, the futures markets indicate that in mid-December 2017 the expected price is $52.37 with a 68% chance that oil prices will be between $46.50 and $58.00 per barrel. Likewise, there is about a 95% chance that prices will be between $40.00 and $65.00. For a longer-term view, by mid-March 2018 the +/- one standard deviation price range is between $44.00 to $63.00 per barrel with an expected value of $52.61.

Natural Gas Outlook

We can do the same thing for natural gas futures, currently trading at $2.94 per MMBtu on the Henry Hub (ticker /NG). Although more affected by seasonal factors than crude oil, in December 2017, the expected price is $3.21 with a +/- 1σ price range of $2.75 to $3.95 per MMBtu, and the 2σ range (95%) of $2.25 to $4.95 per MMBtu. For a longer-term view, by mid-February 2018 the expected price is $3.23 per MMBtu with a +/- one standard deviation price range is between $2.55 to $4.65 per MMBtu.

1. Chicago Tribune, “The rise of electric vehicles and the fall of gas engines is a matter of when, not if”, October 15, 2017, http://www.chicagotribune.com/classified/automotive/fuelefficient/sc-auto-cover-electric-vehicles-combustion-engines-20171018-story.html

2. Global EV Outlook 2017, International Energy Agency, https://www.iea.org/publications/freepublications/publication/GlobalEVOutlook2017.pdf

3. Bloomberg New Energy Finance, Electric Vehicle Outlook 2017, https://about.bnef.com/electric-vehicle-outlook/

4. Barron’s, Oct. 5, 2017, http://www.barrons.com/articles/death-of-the-internal-combustion-engine-oil-implications-1507212733

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Tags: Oil & Gas Price Outlook October 2017, Gas Price Outlook October 2017, Oil Price Outlook October 2017

 

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A New Way to Method for Determining Value of Shale Acreage and Value of Operating Companies¹

Credit Suisse recently developed an algorithm nicknamed “SAM” to analyze large amounts of data from shale production. This tool assesses the value of the shale mineral acreage and of operating companies for those fields.  Credit Suisse claims their SAM analyzes oilfield data by dividing producing shale acreage into 10×10 mile sections and then incorporating current production, drilling, and completion data.

Credit Suisse’s algorithm supports the following conclusions:

• The Midland, Delaware, STACK, and Haynesville plays have the highest acreage values ($/acre).
• Values are Improving in the PRB and Bakken.
• The Permian basin has driven the greatest positive change in equity value of companies operating within.

Credit Suisse’s chart below compares the Total Recoverable Resources of major oil and gas plays from around the world.  Of interest is that the Midland and Permian basins are very comparable to Saudi Arabia’s reserves. 

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 crude oil price as of September 15, 2017 and predicted crude oil prices based on options on oil futures contracts (ticker /CL).

On the graphic below, 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).

Based on September 15, 2017, pricing, the futures markets indicate that in mid-October 2017 there is about a 68% chance that oil prices will be between $46.50 and $54.00 per barrel. Likewise, there is about a 95% chance that prices will be between $41.50 and $59.00.  For a longer-term view, by mid-December 2017 the +/- one standard deviation price range is between $44.00 to $58.50 per barrel with an expected value of $51.00.

Natural Gas Outlook

We can do the same thing for natural gas futures, currently trading at $3.02 per MMBtu on the Henry Hub (ticker /NG).  Although more affected by seasonal factors than crude oil, in October 2017, the expected price is $3.08 with a +/- 1σ price range of $2.75 to $3.45 per MMBtu, and the 2σ range (95%) of $2.45 to $3.95 per MMBtu.  For a longer-term view, by mid-December 2017 the expected price is $3.33 per MMBtu with a +/- one standard deviation price range is between $2.75 to $4.25 per MMBtu.

1. A New Algorithm to Draw Shale E&P Conclusions From 1 Million Data Points. Ideas Engine Series. Credit Suisse. June 1, 2017

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Tags: Oil & Gas Price Outlook September 2017, Gas Price Outlook September 2017, Oil Price Outlook September 2017

 

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Drilling Rigs’ Day Rates Pricing

According to a recent Bank of America Merrill Lynch research report,¹ “High-spec” day rates have remained flat for two months.  The term “High-spec” refers to rigs with powerful top drives, hoisting systems and pumps.  According to industry sources, rigs with larger (+1,000) horsepower ratings account for an estimated 60 percent of the active rig fleet.

The average day rate for AC-drive 1,500-1,999hp rigs were largely unchanged at $17,999/d in July from $17,996/d in June and $17,977/d in May.  When asked about the day rate outlook over the next six months, nearly half of respondents saw no change in pricing, based on sub-$50 oil prices, while 16% forecast a 5-10% increase by year-end.  The remaining 35% were uncertain about where day rates were headed.  Spot work continued to dominate, representing 79% of all work by surveyed drillers,  unchanged from June. Long-term contracts only represented 3% of total work, down from 9% in June, while multi-well contracts rose to 18% from 12% in June.² 

 Six Month Oil Price Review

The downward trend in oil prices has continued over the past six months.  As shown in the chart below, oil futures (\CL) have traded within an approximate $7.50 band, trending downward to today’s price of approximately $47.00 per BBL.

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 crude oil price as of August 15, 2017 and predicted crude oil prices based on options on oil futures contracts (ticker /CL).

On the graphic below, 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).

Based on August 15, 2017 option prices, the futures markets indicate that in mid-October 2017 there is about a 68% chance that oil prices will be between $42.00 and $53.50 per barrel. Likewise, there is about a 95% chance that prices will be between $35.00 and $61.00.  For a longer-term view, by mid-January 2018 the +/- one standard deviation price range is between $39 to $63 per barrel with an expected value of $48.

Natural Gas Outlook

We can do the same thing for natural gas futures, currently trading at $2.95 per MMBtu on the Henry Hub (ticker /NG).  Although more affected by seasonal factors than crude oil, in October 2017, the +/- 1σ price range is $2.65 to $3.45 per MMBtu, and the 2σ range (95%) is $2.25 to $4.15 per MMBTU.  The expected value of natural gas prices in mid-December 2017 is $3.28 per MMBTU.

1. Bank of America Merrill Lynch: “Land Drillers Sentiment deteriorates in July survey, day rates hold their ground,” Industry Overview, Equity | 08 August 2017

2. American Oil and Gas Reporter, Digital Magazine, Monday, August 14, 2017

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Tags: Oil & Gas Price Outlook August 2017, Gas Price Outlook August 2017, Oil Price Outlook August 2017

 

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One of the Reasons That Oil’s Price Recovery Has Stalled

Oil Price Outlook July 2017

Over the long-term, US active drilling rig counts and oil prices have moved reasonably in sync.  As shown below, over the last ten years, there has been a high degree of correlation, as basic economics would suggest.

Recently, however, this relationship has reversed, at least in the short term.  Rig counts have increased as oil prices have retreated due to increased inventories.

This breakdown has exacerbated oil’s price recovery, hopefully temporarily. 

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 crude oil price as of July 17, 2017 and predicted crude oil prices based on options on oil futures contracts (ticker /CL).  The drop from last month was primarily driven by recent EIA reports showing that inventories had increased, versus the expected decrease priced into the market.

On the graphic below, 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).

Based on July 17, 2017 option prices, the futures markets indicate that in mid-September 2017 there is about a 68% chance that oil prices will be between $41.50 and $52.50 per barrel. Likewise, there is about a 95% chance that prices will be between $36.00 and $59.00.  For a longer-term view, by mid-December 2017 the +/- one standard deviation price range is between $39.00 to $63.00 per barrel with an expected value of $47.55.

Natural Gas Outlook

We can do the same thing for natural gas futures, currently trading at $3.04 per MMBtu on the Henry Hub (ticker /NG).  Although more affected by seasonal factors than crude oil, in September 2017, the +/- 1σ price range is $2.65 to $3.55 per MMBtu, and the 2σ range (95%) is $2.25 to $4.15 per MMBTU.  The expected value of natural gas prices in mid-December 2017 is $3.36 per MMBTU.

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Tags: Oil & Gas Price Outlook July 2017, Gas Price Outlook July 2017, Oil Price Outlook July 2017

 

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Recent ISIS Threats to OPEC

Oil Price Outlook June 2017

On June 7^th, armed assailants in Tehran attacked both the Parliament building and the tomb of its revolutionary founder.  These attacks were the worst to hit the Islamic Republic in years, shattering Iran’s self-proclaimed image of calm in a turbulent region.

Iran’s Islamic Revolutionary Guards Corps blamed both Saudi Arabia and the United States for the assaults.  At the same time, a Sunni extremist group called the Islamic State took credit for the terrorist attacks.

These terrorist attacks on June 7th also raised concerns about the region’s oil markets.  The key concern is whether Iran’s response to those attacks could destabilize OPEC and the international oil market.  On May 19th, the Islamic State had also claimed responsibility for attacks on two checkpoints near the oil fields in Basra, Iraq.

If ISIS-related factions continue to target onshore oil and natural gas infrastructure in southern Iraq, it could impact the OPEC members’ agreement to cut production, creating downward pressure on oil prices.

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 crude oil price as of June 15, 2017 and predicted crude oil prices based on options on oil futures contracts (ticker /CL).  The drop from last month was primarily driven by recent EIA reports showing that inventories had increased, versus the expected decrease priced into the market.

On the graphic below, 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).

Based on June 15, 2017 option prices, the futures markets indicate that in mid-July 2017 there is about a 68% chance that oil prices will be between $40.50 and $48.50 per barrel. Likewise, there is about a 95% chance that prices will be between $36.50 and $55.00.  For a longer-term view, by mid-December 2017 the +/- one standard deviation price range is between $37.50 to $63.00 per barrel with an expected value of $45.94.

Natural Gas Outlook

We can do the same thing for natural gas futures, currently trading at $2.94 per MMBtu on the Henry Hub (ticker /NG).  Although more affected by seasonal factors than crude oil, in August 2017, the +/- 1σ price range is $2.55 to $3.45 per MMBtu, and the 2σ range (95%) is $2.15 to $4.15 per MMBTU.  The expected value of natural gas prices in mid-August 2017 is $2.94 per MMBTU.

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Tags: Oil & Gas Price Outlook June 2017, Gas Price Outlook June 2017, Oil Price Outlook June 2017

 

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Future Oil Usage to Join Cigarette Smoking?

Oil Price Outlook May 2017

The growth in demand growth for oil and gas has been curbing within developed nations for several years. Developments in greener energy sources and increased efficiency of energy-thirsty products like vehicles and cell phones have offset the increase in demand driven by population usage growth.  Similar to cigarette smoking, it appears that the end of an era of fossil fuels may be in sight.¹

Domestically, wind energy has been the largest source of development, accounting for over half of growth in 2016.  Furthermore, wind energy has suppressed the price of wholesale natural gas and has driven some nuclear facilities into retirement.  Compound these forces with the decline of coal-based generation resulting from regulatory pressures; the U.S. is moving with a swift trajectory toward green energy.  The chart below shows the cresting of the traditional energy sources like coal and the increase of wind.

Globally, Germany has been exiting from nuclear power generation toward solar and has become a net exporter of its solar power. Additionally, Denmark has produced its first windfarm without the aid of subsidies.² Also, foreign demand for U.S. Liquified Natural Gas (“LNG”) has not materialized as expected either.³

Despite the global progression towards renewable energy, oil and natural gas offer far too much incentive to be entirely cut within the foreseeable future. Technological improvements have allowed operators to earn profits at lower prices and offset an expected decline in market share. These lower oil and natural gas prices make it even more difficult to replace fossil fuels as an energy source Furthermore, renewable technology is still nascent and is far from displacing traditional fuel sources.  Political and sentimental forces aside, consumers still vote with their pocket books.

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 May 15, 2017, 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).

Based on May 15, 2017 prices, the futures markets indicate that in mid-July 2017, there is about a 68% chance that oil prices will be between $43.50 and $56.00 per barrel. Likewise, there is about a 95% chance that prices will be between $37.00 and $63.00.  For a longer-term view, by mid-December 2017, the +/- 1 standard deviation price range is between $40.50 to $63.00 per barrel, with an expected value of $50.41.

Natural Gas Outlook

We can do the same thing for natural gas futures, currently trading at $3.36 per MMBTU on the Henry Hub (ticker /NG).  Although more affected by seasonal factors than crude oil, in July 2017, the +/- 1σ price range is $2.95 to $4.05 per MMBtu, and the 2σ range (95%) is $2.55 to $4.75 per MMBTU.  The expected value of natural gas prices in mid-July 2017 is $3.46 per MMBTU.

1. Credit Suisse. Another Oil Price Wobble – What to Make of the Bearish Oil Narratives (May 10, 2017)

2. Financial Times. Dong Energy breaks subsidy link with new offshore wind farms (April 17, 2017)

3. Credit Suisse. Another Oil Price Wobble – What to Make of the Bearish Oil Narratives (May 10, 2017)

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Tags: Oil & Gas Price Outlook May 2017, Gas Price Outlook May 2017, Oil Price Outlook May 2017

 

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Natural Gas Up Over 25% Since February 1, Wells Fargo Forecasting $3.40/MMBtu

A recent research report by Wells Fargo Securities calls for tightening supply/demand fundamentals, providing further support to their natural gas price forecast of $3.40/MMBtu on average for the remainder of 2017, which is 9% above consensus estimates and highest on the Street.¹

The report goes on to say that there is a lack of natural gas storage, noting that natural gas fundamentals were running approximately 2 Bcf/d below supply after adjusting for temperature variations versus historical averages. Recent natural gas storage data appears to support their point of view.

Oil prices also made a significant recovery last month, moving from approximately $48.00 to $53.00/BBl, a 10% increase.

ValueScope Now Offers SEC Reserves Reporting

ValueScope is proud to announce that we are now working with Albert (Bert) McDaniel, P.E. to offer our clients SEC reserves reporting.  Bert has more than 30 years of engineering and banking experience, with specific expertise in drilling, production and reservoir engineering, including economic evaluations for banks.  Bert’s experience, combined with ValueScope’s deep expertise with industry standard software products like PHDWin and advanced Monte Carlo analyses, allow us to efficiently produce these reports.  Additionally, our Chartered Financial Analysts, PhD Economists, and engineering group have demonstrated experience and expertise in developing fair market valuations of these reserves.

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 April 17, 2017, 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).

Based on April 17, 2017 prices, the futures markets indicate that in mid-July 2017, there is about a 68% chance that oil prices will be between $47.00 and $61.00 per barrel. Likewise, there is about a 95% chance that prices will be between $38.50 and $69.00.  For a longer-term view, by mid-December 2017, the +/- 1σ price range is $43.50 to $67.00 per barrel, with an expected value of $54.71.

Natural Gas Outlook

We can do the same thing for natural gas futures, currently trading at $3.23 per MMBTU on the Henry Hub (ticker /NG).  Although more affected by seasonal factors than crude oil, in July 2017, the +/- 1σ price range is $2.85 to $4.05 per MMBtu, and the 2σ range (95%) is $2.35 to $5.05 per MMBTU.  The expected value of natural gas prices in mid-July 2017 is $3.42 per MMBTU.

1. Wells Fargo Equity Research, Exploration and Production, April 12, 2017

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Tags: Oil & Gas Price Outlook April 2017, Gas Price Outlook Apr 2017, Oil Price Outlook Apr 2017

 

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