Posts tagged “predictions”
I read an article this morning where one analyst predicted that we are in a 10-15 year bear market for oil. The analyst stated that the market is oversupplied by about a million barrels per day (it isn’t — see the charts in today’s article), that shale oil production will surge this year (it won’t), and that the OPEC agreement to cut production would fall apart (it won’t). His projection was that we will spend 2017 below $50 per barrel (bbl) and in 2018 prices will be back below $40/bbl.
I disagree with this assessment. I believe we will look back in a few years at 2016 as the year the energy sector recovery got underway in earnest. I believe 2017 continues the recovery. Today, I explain how I see the energy markets shaping up this year, in the context of my 2017 predictions.
1. Crude oil will flow through the Dakota Access Pipeline (DAPL) in 2017. CONTINUE»
Almost a year ago I made my 2016 energy predictions (see “My 2016 Energy Predictions.”) I have been making annual predictions for nearly a decade now, primarily as a framework for sharing my views on energy markets in the coming year. I try to make predictions that are specific, measurable and actionable. I prefer not to leave anything open to interpretation or spin. With few exceptions, at the end of the year a prediction is right or it is wrong.
I try not to make “no-brainer” predictions. When I make these calls, there is a fair level of uncertainty around them.
Although I had one high-profile miss this year, the others were mostly correct. Here they are, along with commentary on each. CONTINUE»
In January of this year, as I do every year, I made several energy predictions for the upcoming year. (See My 2016 Energy Predictions). Now that half the year is in the books, I thought it might be a good idea to check in and see how these predictions are tracking.
As a reminder, I strive to make predictions that are specific, measurable, and preferably actionable. If forecasts are broad and vague, one can almost always declare victory. I would also remind readers that my predictions are based on what I believe will happen, which isn’t the same thing as predicting what I want to happen. My desire for a particular outcome has absolutely no bearing on a prediction. I am simply trying to accurately gauge the most likely outcome.
Here are the predictions, along with an update through the first half of the year. CONTINUE»
When I made my annual energy predictions a year ago, I noted that I foresaw a “lot of uncertainty in the energy markets” and indicated that “the direction on several fronts is unclear.” That certainly proved to be the case as numerous pundits – including me – missed on oil price predictions.
Unfortunately, the market uncertainty is carrying over into 2016. This has implications for several predictions so, as I cautioned last year, it will be a challenge to repeat 2014′s record. But as always, the context is more important than the prediction itself, because context allows one to adjust one’s own views as events play out during the year. I may predict an oil price, but I also try to provide context as to what could go wrong with a prediction, so that readers can adjust their own expectations as the year unfolds.
As a reminder, I strive to make predictions that are specific, measurable, and preferably actionable. If forecasts are broad and vague, one can almost always declare victory. CONTINUE»
Why Make Predictions?
While there are actually other stories unfolding in the world of energy, you would never know that by my inbox. Most of the correspondence I have received in the past week is still related to oil prices, particularly following the recent huge rally in crude futures. A few readers also wanted to make sure that I noticed that one of my 2015 predictions had fallen last week. I will address that in today’s column.
For background, each year in January I make predictions for the upcoming year, and I provide the context for those predictions. (See My 2015 Energy Predictions). I have been doing this for several years, and at the end of each year I grade my predictions. As I have stated on many occasions, context around a prediction can be more important than the prediction itself. When I grade the predictions, I will talk about the context when I made each prediction, and the reasons the predictions turned out to be right or wrong.
But one reader asked why I would even attempt to make predictions given such uncertain conditions. I make predictions to set up a narrative that describes what I see unfolding in the energy sector, incorporating as much data as I can into making each prediction. While this is not an investment column, I am aware that some readers use it for investment advice. So without overtly recommending investments, I generally try to make predictions that are actionable. I will give 2 examples of that today, one of which is the prediction that failed last week. CONTINUE»
When I made my energy predictions for 2015, I made some very aggressive predictions. Perhaps the most aggressive was that the closing price of West Texas Intermediate would not fall below $40/barrel (bbl) in 2015. Why do I consider this a particularly aggressive prediction? Because on the day I made it, the price of WTI closed at $48.80, but in each of the previous three months the price of WTI had dropped at least $10/bbl over the course of the month. So if WTI had maintained the same downward trajectory, it could have easily ended January below $40/bbl. My prediction could have been proven wrong before we even got out of January, so I really stuck my neck out on that one.
It’s not that there is anything special about $40, and I acknowledge that it’s possible that we could overshoot. But I made the prediction to highlight my conviction that $40 oil simply isn’t a sustainable price in today’s world.
A number of respected pundits are projecting that we will go below $40/bbl, with some suggesting that crude could even crash all the way to $30/bbl. Last week on CNBC, respected oil analyst Stephen Schork said “I do think this is a dead cat bounce”, elaborating that at least over the next 2 to 3 months that there is too much oil supply relative to current demand. My point is that it has been a widely held belief that oil is going to fall below $40/bbl, so I am definitely on the wrong side of conventional wisdom on this prediction. That’s not a safe place to be, because when you are wrong in that case people think “Everyone read this correctly except for you.”
But I think conventional wisdom is wrong in this case. CONTINUE»
Happy New Year to readers around the world! For the past 5 or 6 years, I have begun the year by making predictions for the upcoming year in the energy markets. I am generally happy if I can hit on 60-80% of them. In 2014 I went 5 for 5, but I can say with a fair amount of confidence that this is a feat that’s unlikely to be repeated for 2015.
The reason for this is that I see a lot of uncertainty in the energy markets at this point. There are many changing variables right now, and the direction on several fronts is unclear. And if you look at some of the predictions others have made, that becomes obvious. I have seen predictions of $30 per barrel (bbl) oil and $100/bbl oil, and some suggesting that we would see both extremes. I have also seen people predict that oil production would decline in the U.S. after rising for 6 straight years.
Nevertheless, it’s time to take a stab at 2015. I will offer up my predictions, and explain the reasoning behind them. This year I am going to make 6 predictions. Note that understanding the narrative around the prediction can be more important than the prediction itself, because that can better prepare you for reacting to changing market conditions. CONTINUE»
In the previous article, I graded the 2013 predictions that I made a year ago. I scored well on the direction of oil and gas prices, the shrinking Brent-West Texas Intermediate (WTI) differential, and continued growth in US oil production (although it grew even faster than I expected). My only complete miss was that I expected approval for the northern leg of the Keystone XL pipeline. (The southern leg, incidentally, is scheduled to begin shipping oil this week from the major crude oil storage hub at Cushing, Oklahoma to the Gulf Coast near Houston).
Today I offer up my predictions, and the reasoning behind them, for what I think will transpire in 2014. One thing I have learned in making predictions is that they must be specific, and not subject to interpretation at the end of the year.
“The US oil industry will continue to thrive” is much too vague. “The price of crude will rise” is also too vague, because perhaps crude rises for part of the year, or perhaps some crudes rise and some don’t. On the other hand, “The average price of Brent crude will be higher in 2014 than in 2013” is specific and measurable. CONTINUE»
In my list of Top 10 Energy Related Stories of 2010, I made three predictions for 2011. Those predictions were: I believe high oil prices will continue to put a strain on the economies of oil-importing nations. I expect that we will see oil prices once again head above $100 per barrel, although I expect the annual average for 2011 to be below $100 because of sluggish economies. I also expect that the bills are going to start coming due for some of the high profile ‘next generation’ biofuel producers, and that we will see bankruptcies from some of the companies I have discussed in this column. In hindsight, those predictions look pretty tame. However, bear in mind that oil… Continue»
I knew nothing about Barack Obama until my wife brought him up following his keynote address at the 2004 Democratic National Convention. She told me “I just saw a speech from a man that I think will be president some day.” After watching a few speeches by Obama, I concluded that she was on to something. He was a dynamic speaker, and inspired people in a way that few politicans do. So I am sticking with the prediction I made when Hillary Clinton was still the favorite to win the Democratic nomination: Tomorrow Senator Obama will win the presidency. Further, I predict that it won’t be close; that Obama will have well over 300 electoral votes and will probably beat… Continue»