Oil Nostalgic for the Nifty Fifties

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Crude oil prices have rebounded to over $50/barrel, and gasoline prices have followed suit. Nevertheless, oil consumed per unit of GDP in the U.S. (oil intensity) has declined for many years.

Oil prices have been robustly rebounding after a steep decline, but are still hovering in the high $40’s, a far cry from the $53 level achieved a month ago on 4/11/17. We know there is a supply glut of oil and we know that the most agile U.S. shale producers have been able to use technology to get the breakeven price of oil down to around $30/barrel. The EIA forecasts an increase in U.S. production in 2017 citing technological advances, which will increase U.S. drilling further, comparatively higher prices than in 2016 and Trump energy policies. However, global demand is increasing by an estimated 1.2 mb/d over the next five years and with the global economy surprising on the upside, it might be demand that is the wildcard not supply. Global Perspectives forecasts prices will hover in the $50’s. Meanwhile, the market is taking a breather today, digesting some particularly bad earnings data regarding some of the brick and mortar retailers in what has otherwise been a very bright Q1 earnings season. Please follow the price of oil on page 61 of the Global Perspectives™ Book

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