Oil Prices – A Barrel Of Texas Tea: Half-Full Or Half-Empty?

Oil Prices - A Barrel Of Texas Tea: Half-Full Or Half-Empty? by Jim Masturzo, Research Affiliates

Key Points

1. We develop a simple model to forecast the price of oil 12 months ahead, using four demand variables (return of copper, relative value of the USD, 10-year U.S. T-bond yield, and slope of the oil futures term structure) and two supply variables (U.S. oil production and OPEC oil production).
2. Cyclical changes in production by both the United States and OPEC accounted for 2/3 of the more than 50% drop in the price of oil since the June 2014 peak at over $105 a barrel.
3. Our model forecasts an oil price of $30–$40 a barrel in summer 2017. Investors seeking diversification and yield should...
   

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