2018 Oil Outlook

Are the days of $150 oil over?

You remember those days, right? If you have had any skin in the game, it was quite a nerve-wracking experience — especially if you were playing the wrong side.

More importantly, it was far easier to call the bottom back then… and profit from it.

But this isn’t the same situation we find ourselves in right now.

In fact, a sudden price spike is the last thing we want to see happen. Remember, if crude prices rise too high, too soon, all it would accomplish would be a flood of oil coming out of the United States’ various tight oil plays.

The moment those E&P players in the Lower 48 learn they can bolster their cash flow from higher prices, they’ll immediately turn on the taps…

And I mean more than simply drilling new wells.

Take a look at this:

Above, you’ll find a list of how many drilled but uncompleted wells (DUC) can be found in our largest oil-producing regions.

In August, there were more than 7,000 DUC wells in total. The cash-strapped upstream sector in the oil industry would love nothing more than to complete those wells and sell that crude for a handsome profit on the back of a price spike.

Unfortunately for them, it’s taking more and more to spook the market these days. It seems as if there’s a daily headline somewhere that is reporting a new missile launch in North Korea or another outbreak of fighting in the Middle East.

I can remember a time when the mere thought of a supply disruption would send traders into a frenzy.

Is it possible that the Middle East turmoil has become white noise? Maybe.

So what can we expect next year?

Oil Outlook 2018: Long Lost Recovery or a Price Crash?

I told my readers recently that the road to recovery will be slow going.

The Energy Information Administration (EIA) agrees with me:

In 2016, the cost for a barrel of Western Texas Immediate (WTI) averaged $43.33. This year, WTI is expected to average $48.83 per barrel.

Next year, oil will continue to trend higher as the supply/demand imbalance works itself out. The EIA’s current forecast is that WTI prices will increase roughly 1.5%, averaging approximately $49.58 per barrel.

Yet despite the slight price increase expected year over year, the EIA’s Short-Term Energy Outlook projects gasoline prices to remain flat in 2018, averaging just $2.35 per gallon.

The Great Balancing Act of 2018

Look, you and I both know there are a myriad of factors that swing crude prices one way or another.

Today, it seems like a new natural disaster is springing up daily.

And I don’t just mean bad weather; these events have been utterly catastrophic, from back-to-back-to-back-to-back hurricanes (Harvey to Irma to Jose to Maria) to the devastating earthquake in Mexico that has killed over 250 people so far.

These terrible events have had an incredible impact on the supply/demand dynamics.

Remember, Hurricane Harvey knocked out more than a dozen refineries along the U.S. Gulf Coast, including both the largest and second-largest oil refinery in the United States — Saudi Aramco’s newly acquired Port Arthur and Exxon’s Baytown facilities, respectively.

If there’s one takeaway that you get today, it’s this: focus on the fundamentals.

Ultimately, balancing out the supply and demand imbalance is the largest catalyst for this fragile recovery.

The EIA reported that U.S. oil output in August 2017 averaged 9.2 million barrels per day.

Next year, it expects our domestic crude production to jump about 5.4%, averaging 9.8 million barrels per day.

Now, I know betting on oil isn’t as popular as it was a decade ago. The excitement over the shale boom has tempered somewhat after prices crashed between the summer of 2014 and February of 2016.

Hey, even I get caught up in the electric vehicle revolution that is just starting to build momentum; it’s almost impossible not to given the fact that Tesla has officially rolled out its Model 3.

Just remember to keep your expectations tethered to reality.

And in case you don’t think your oil investments are worth holding onto, always have this chart as a handy reminder:

Between 2015 and 2040, the EIA estimates that global energy demand will rise 28% — from 575 quadrillion Btu to 736 quadrillion Btu!

In today’s low oil price environment, it’s far more difficult to find the right winner. Unfortunately, it means a lot of the investment herd will lose their shirts betting on the wrong horse.

We’re in a stock picker’s market today, and the field of winners is a lot slimmer than it was in 2009.

For those of you who can see the buying opportunity right now, I recommend focusing your due diligence right here at home, where the best oil stocks on the planet are drilling right now!

Start here.

Until next time,

Keith Kohl

Check us out on YouTube!

A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.

Keith’s keen trading acumen and investment research also extend all the way into the complex biotech sector, where he and his readers take advantage of the newest and most groundbreaking medical therapies being developed by nearly 1,000 biotech companies. His network includes hundreds of experts, from M.D.s and Ph.D.s to lab scientists grinding out the latest medical technology and treatments. You can join his vast investment community and target the most profitable biotech stocks in Keith’s Topline Trader advisory newsletter.