Wells Fargo Predicts Crude Oil Prices to Rise as US Production Slows
In a recent note, Wells Fargo analysts have stated that crude oil prices, which have been on a downward trend lately, are likely to see an uptick soon as US oil production begins to slow down.
Despite starting the year with positive returns, crude oil prices have dipped into the negative territory. The global benchmark price, Brent crude, is down 3.5% year-to-date, while the main US benchmark price, West Texas Intermediate (WTI), has decreased by 0.4%.
The decline in crude oil prices can be attributed to a combination of factors affecting both demand and supply. The global economy has been showing signs of slowing down, impacting the demand for oil. On the supply side, concerns have arisen regarding potential production increases from major oil producers such as OPEC+ and the US.
However, Wells Fargo believes that these demand and supply fears are already reflected in current crude oil prices. The bank notes that while global oil demand has been weak, it is not worsening. Moreover, with central banks around the world cutting interest rates, global liquidity is on the rise.
In terms of supply, both OPEC+ and the US are more likely to reduce production than increase it, especially with oil prices hovering in the $60s and $70s per barrel. OPEC+ has confirmed that it will maintain planned production cuts, while the US is expected to see a slowdown in production growth due to the high cost of opening new shale wells.
In conclusion, Wells Fargo anticipates that crude oil prices will soon rebound. With major oil producers having little incentive to ramp up production at current price levels, the bank believes that a price firming is on the horizon.
Analysis: This article discusses the recent decline in crude oil prices and the factors influencing this trend. It highlights Wells Fargo's prediction of a potential price increase in the near future as US oil production slows down. For investors, this information suggests that there may be a buying opportunity in crude oil as prices are expected to rise. It is important to monitor developments in the oil market and consider the insights provided by experts like Wells Fargo to make informed investment decisions.
