Crude Could Fall Back to $30s Short Term

With WTI crude prices up 51% since early February, Macquarie Capital’s Vikas Dwivedi is calling for a short term correction back to the back to mid-$30 to low $30 range.

Dwivedi sees several short term factors impacting the price:

  • Iran exports up 500 K BPD in the next two weeks
  • KSA loadings up 300 K BPD vs Q415
  • Global T/A will reach 5.7 MM BPD in mid April
  • ETF outflows may accelerate
  • U.S. crude imports likely to stay at or above 7.5 MM BPD
  • USD weakness has slowed and reversed
  • Ceyhan and Forcados crude supplies returning

The analyst said the rally was likely initiated by a combination of institutional and retail capital inflow. The positive price action has been accelerated by several waves of short covering since mid-February. The USO once again has dominated ETF capital inflows adding nearly 40 K contracts of YTD length to the front month WTI futures contact.

Long term they remain bullish on crude and expect WTI to return to $70/bbl per barrel in 2018.

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