Expect WTI crude at $70-80 and Brent at $74-84 by end of CY18: David Lennox

Talking to ET Now, David Lennox, Fat Prophets, says with summer coming when demand rises and production cuts OPEC suggesting lasting beyond 2018, oil prices are going to push higher in the near term.

Edited excerpts:

What do you make of what is happening in the commodity markets led by crude? Is it also a question of maybe investors pulling out money from say the currency markets or the Chinese markets and equity markets in the US and putting it into crude, thanks to the kind of commentary you are getting from Saudi Arabia?

We have to look at the responses that we are seeing across the commodity space. We have seen base metal falling because of the trade war fears but against that, we are seeing crude prices actually rising. If we look at all the rhetoric regarding trade wars, there has been no mention at all of either oil or natural gas. That means, that particular sector can continue on its merry way at this stage!

Of course, one of the key drivers that we have seen pushing oil market ahead is Saudi Arabia suggesting that the 32.5 million barrels ceiling of production cuts that they have got in place should continue beyond the end of 2018 and that is certainly giving the market a lot of boost.


Where do you see crude prices settling?

At this stage, there is a couple of headwinds that are pushing against the crude price and that obviously the key one is US domestic production that is running now at 10.4 million barrels of oil per day and that has been generally rising over the course of 2018.

One would suggest with that sort of profile, we would see the crude prices struggle to rally. The other side is, in the US as well, we are seeing domestic demand starting to rise as we move towards the key summer driving season in that particular country.

That would suggest that we are going to see a very strong drive season. So, with that in place and the cuts that OPEC are suggesting will last beyond 2018, we would say that the oil prices going to push higher in the near term and we would be looking towards the end of calendar 2018 for WTI prices $70-80 and a Brent price of $74 to 84.