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Oil & Gas Predictions For 2017

Oil

This will be my last article of 2016 as I am taking a couple of weeks off to return to England and spend Christmas with my family. I mention that not because I expect any of you to care, but to explain why this week’s article will deal with the prospects for energy markets in 2017 a couple of weeks earlier than is customary.

Before we get into what to expect next year, though, it is worth looking back on 2016 and seeing what lessons we can learn from the two big energy markets, oil and natural gas. Both are markets that are frequently volatile, but even taking that into account this year has been one of wild swings.

(Click to enlarge)

(Click to enlarge)

After starting the year virtually in freefall both natural gas (top) and WTI (bottom) turned around in the first quarter and have since more than doubled in price. In both cases, though, fundamentals have actually changed little and it appears that the anomaly was the low point early in the year. Yes, we have an agreement from OPEC but that came recently once the move up was almost over and has not yet taken effect. Similarly natural gas has benefitted from the beginning of exports and many power plant conversions coming on line, but inventory builds are still the norm. It seems clear that the fears that drove WTI below $30 and natural gas to around $1.60 were overdone.

I guess the lesson to be learned from the first half of the year, therefore, is an old one…when fear…

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