Analysts: New Price Downfall Not Sustainable

With both the U.S. and global benchmarks for oil prices hitting fresh six-year lows, analysts are scrambling to figure out where the slide will end.

In Monday morning trading, Brent was trading at $43 per barrel and North America’s benchmark, West Texas Intermediate (WTI) was at $39 per barrel. Analysts at Tudor Pickering Holt & Co. in Houston said in their daily note to investors that it’s hard to buy energy stocks with oil prices dropping almost every day at a drip-drip-drip pace.

“With oil down again, $20 per barrel predictions will be amplified,” TPH said. “Remember the oil business doesn’t work at these prices.”

At Robert W. Baird & Co. in Ohio, analysts said global risks are among the forces working to push West Texas Intermediate below $40 per barrel. The sell-off in global equities witnessed in the last three trading sessions extended overnight, punctuated by an 8.5 percent drop in the Shanghai Composite, Baird analyst Ethan Bellamy wrote. With Asian and European equity indices generally 3 to 5 percent lower Monday and the S&P 500 futures that have fallen 3.2 percent to 1,907, it’s compounding last week's retreat. What’s more, he said, firming bids to G7 sovereign bonds that have pushed the U.S. 10-year Treasury yield 6 basis points lower to 1.98 percent and continued flight from emerging market currencies reinforce the apprehensive tone of cross-asset trading.

“Against this backdrop, WTI has withered … Brent has declined … and natural gas is weaker,” he wrote. “Until this broader liquidation in risk can be arrested, expect the energy group to remain under pressure.”

And at Raymond James & Associates in Houston, analysts noted the global oil economy hasn’t perked up the way many had expected.

“With our recent downward revision in 2015/2016 oil prices and U.S. [exploration and production] cash flows, we now think the U.S. drilling recovery is likely to be much slower than previously forecasted.”

As for rig count, RayJa expects the 2016 average U.S. rig count to be down about 57 rigs. In conjunction with that, they said, a reduction in forecasted active rigs means that U.S. oilfield earnings estimates are coming down.

An award-winning journalist, Deon has reported on energy, business and politics for almost 20 years. Email Deon at


Click on the button below to add a comment.
Post a Comment
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.


Our Privacy Pledge

More from this Author
Deon Daugherty
Senior Editor | Rigzone
 -  BLOG: Challenging Attitudes toward Sex... (Oct 25)
 -  Energy IPO Pace Picks Up (Oct 20)
 -  BLOG: US Sits on the Sidelines for Ira... (Oct 19)
 -  DUCs Could Boost US Production by 250K... (Oct 19)
 -  Iran is Open for the Oil Business - So... (Oct 18)

Most Popular Articles

From the Career Center
Jobs that may interest you
Project Controls Specialist
Expertise: Project Management
Location: Minneapolis
Business Development Manager
Expertise: Business Development|Construction Manager|Sales
Location: West Sacramento, CA
Business Development Manager
Expertise: Business Development|Construction Manager|Sales
Location: Denver, CO
search for more jobs

Brent Crude Oil : $50.79/BBL 1.30%
Light Crude Oil : $49.96/BBL 1.10%
Natural Gas : $2.77/MMBtu 2.12%
Updated in last 24 hours