Credit Suisse's Latest Oil Projections

In a new report, Credit Suisse analyst Jan Stuart tries to pin down the murky outlook for global crude oil prices. The economics behind oil prices are extremely complicated and difficult to predict, and Stuart discusses the latest numbers in the oil industry and exactly what Credit Suisse is currently forecasting for the future.

A lot can change in a year
The oil market is now 11 months removed from peak oil prices last year and about seven months past the most severe part of the price collapse. In the past year, shares of the United States Oil Fund ETF USO are down more than 48 percent.

According to Stuart, the most surprising part about the way the oil crisis has played out has been the continuing robust global oil production growth.

The latest
Credit Suisse believes that U.S. oil production likely finally started to decline in April or May. These assumptions are based on the most recent rig count numbers, which have been plunging in recent months as producers attempt to streamline their operations and eliminate the least efficient wells.

Stuart believes that the next leg in the recovery of oil will be based on oil supply. Stuart believes that investors that are watching for the next oil catalyst should keep their eyes on the U.S. upstream segment.

Outlook
According to Stuart, long-term oil prices of $50 per barrel are not economically viable. She believes that a free oil market will eventually produce a relatively stable price based on supply and demand conditions, but until the market gets to that point, investors should expect “volatility with shorter and scarier price-cycles.”


If U.S. oil production has in fact started to decline, Credit Suisse believes that oil prices should continue to rise throughout the summer. In the long-term, Credit Suisse is now calling for WTI prices to stabilize around $75/bbl.