According to a new RBC Capital Markets study, the most bullish predictions for U.S. benchmark crude prices have fallen more than 90% since November, indicating that oil “mega bulls” have been contained in 2023.
More than two-thirds of those who responded to the bank’s most recent biannual oil market and business survey highlighted “difficult” or “extremely difficult” trading and investing circumstances thus far this year.
The analysis, which was released on Thursday, was written by experts under the direction of RBC commodity strategist Michael Tran. “Uncertain macro background, constrained risk deployment and liquidity, OPEC+ policies, China’s openness, a decade of underinvestment, and impending recession. Do we have something missing?
The majority of participants (60.4%) now predict that the price of West Texas Intermediate (WTI) will end in 2023 in the range of US$70 and US$90. 64% of respondents to the November survey predicted that WTI will close the year above US$90. The most optimistic predictions, for US$110 and beyond, decreased from 25% in November to only 1.6% when the survey ended on May 19.
According to Tran, “the right tail, or mega bulls, have been tamed.” The volatility this year has put everyone’s opinions to the test, but commodity hedge funds and trading houses have continued to be our most optimistic category, despite some setbacks.
The most frequently mentioned adverse risk for the upcoming six to twelve months was a recession or a deteriorating macroeconomic backdrop (64%). China’s economy’s slower-than-expected reopening came in second place with 11.9%.
Looking ahead, 22% believe that “steadfast demand despite overblown recessionary fears should push prices higher,” a view shared by the RBC experts. The main driver of the market’s growth, according to 21% of respondents, was supply issues brought on by years of underinvestment in the industry. 9.4% of voters chose China’s reopening. However, 74% claim that the reopening theme is either impossible to quantify or will be negated by other areas of economic weakness.
Not surprisingly, 44% of respondents said they are either not sure or doubtful about adding more risk to the market for the remainder of the year, according to Tran.
