Oil: From Priced for Perfection, to Perfect Storm
Oil is headed to $65, and will likely overshoot our price target, as it undershot below $45 in June. It’s a perfect storm. Domestic production has stalled out, global inventories have come down and have further to fall, OPEC will likely extend its production cuts through 2018 at this week’s meeting, and the Middle East faces black swan risk as the Saudi/Iran rivalry heats up just as Saudi undertakes a dangerous modernization agenda. The US energy sector will thrive in a coming year of higher prices, having been the second-worst performing sector in 2017.