Goldman Sachs has taken the tippex to their oil price forecasts for 2015 and have cut Brent to an $85 average for next year from $100. WTI is shifted down to $75 from $90. In a report, they say that US shale production won’t slow until the price gets to $75 and OPEC will lose their sway on prices.
“We believe that OPEC will no longer act as the first-mover swing producer and that U.S. shale oil output will be called upon to fill this role. Our forecast also reflects the realization of a loss of pricing power by core-OPEC.”
Meanwhile, hedge funds appeared to have received smelly fingers trying to pick the bottom in WTI as they increased net longs by 5.7% in the week to October 21st. Short positions shrank by 20% and the most in 3 months.
CFTC WTI net positions to Oct 21
Adam opined that despite the appearance of a bottom in place at $80 there was still a lot of work to be done, and that has proved to be the case as the front month WTI futures lingers in the low to mid $80 today.
WTI weekly chart 27 10 2014
The $80 mark is becoming the elephant in the room and I’m not too keen on longs while we keep coming back here. If you’re playing a long off of $80 then you should be looking to keep stops tighter and tighter while driving down your profit target.
Brent may be the better play for a long trade from lower down as traders are still hanging out for some OPEC production cut news. On balance I still prefer to look at shorts if we pop higher on those expectations. We stalled at the 50 fib of the 2008/2012 lo/hi around $82.30and have been ranging around $85/87 so there’s still some indecision over direction.
Brent crude weekly 27 10 2014
