Raymond James analysts just got very bearish on oil. How bearish? $65-per-barrel bearish.
The analysts, led by John Freeman, paint a very messy picture of the supply-demand balance for crude.
“The downside risk we saw in oil prices has started sooner than we had expected, due primarily to demand fears spurred by a flare- up of the European debt crisis and negative economic data points across the globe. That said, we continue to see downside pressure for oil prices into 2013, as our oil model points to a severely oversupplied global oil market. While lower demand is part of the story, robust production growth in the U.S. is the monster lurking in the shadows. We expect this bogeyman to fully show himself before the end of this year. Accordingly, we believe Saudi will begin to noticeably cut production in 4Q12, while U.S. producers will begin to curb activity in upcoming weeks. Combining the U.S.-driven resurgence in non-OPEC supply with our lackluster demand expectations, we believe that once the market�s focus shifts from demand to supply, the picture will get uglier. Thus, we are lowering our 2013 price forecast to $65/Bbl for WTI and $80/Bbl for Brent � both well below the futures strip and consensus estimates. We are also lowering our long-term (10-year) WTI forecast to $80/Bbl, while keeping our long-term Brent assumption at $95/Bbl.”
Nymex oil futures slid 0.9% on Monday to $83.27 per barrel.
Freeman is also bearish on natural gas, which he expects to “remain depressed.”
The analysts downgraded 24 oil and gas names. The ratings changes are below. Most are one-notch downgrades, although Northern Oil & Gas (NOG) was downgraded to Underperform from Outperform. NOG fell 4.2% on Monday.
Strong Buy to Outperform: APA, APC, BPZ, CLR, CXO, DNR, EXXI, PXD, QEP, REN, WLL
Outperform to Market Perform: GDP, KOG, OXY, PQ, SFY, OAS, SM
Outperform to Underperform: NOG
Market Perform to Underperform: BRY, COP, FST, ROSE
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