Oil Price Outlook: Hitting the Sweet Spot

Oct 12, 2026

Uploaded by Bulrr

Oil prices staged a steady recovery in 2019, rising by more than 50% from December lows, with improvements in risk sentiment and a tightening of the crude supply-demand balance supporting the move. OPEC+ compliance and involuntary reductions helped eliminate a production surplus, while weakening demand growth and IMF-led GDP downgrades introduced uncertainty. Despite improving sentiment, OPEC spare capacity and rising U.S. shale output with low break-even costs are expected to cap major upside. WTI is forecast to trade range-bound near US$60–65 for the next two years.

LanguageEnglish

CategoryGeneral

FormatPDF

Pages6

Reading Time2 min

AccessFree to download

Highlights

Global oil prices and the recovery

Risk sentiment and speculative positioning

Supply-demand balance tightening

Mixed oil demand outlook

Forecast for WTI price range

TD Economics Oil Price Outlook: Hitting the Sweet Spot Omar Abdelrahman, Economist | 416-734-2873 James Orlando, CFA, Senior Economist | 416-413-3180 May 2, 2019 Highlights • Oil prices have staged a steady recovery since the start of the year, rising by more than 50% from their December lows. • While a good part of the comeback can be traced to broad improvement in risk sentiment, a tightening in the supplydemand balance for crude suggests that recent price levels are sustainable. • The outlook for oil demand is mixed. Demand growth has recently been weakening, especially in OECD countries. Still, fears ofa protracted global slowdown have moderated and expectations for 2019 are pointing to improving growth. • Supply-side factors, however, are taking center stage. OPEC+’s compliance in implementing a 1.2 million bpd cut and involuntary reductions in other countries have been the key driver in supporting a return to a somewhat more balanced market. • OPEC spare capacity, together with the persistent rise of U.S. shale production and its relatively low break-even costs will serve to put a ceiling on any meaningful price acceleration from here. • Accordingly, our price outlook for WTI remains that of a relatively flat, range-bound profile between US$60 to US$65 throughout the next two years. Global oil prices have been on a wild ride over the past year. After peaking at a four-year high of US$76 last October, the price of West Texas Intermediate (WTI) tumbled more than 40% at the end of 2018 (Chart 1) . Since then, prices have staged an impressive comeback, with WTI returning back to the US$66 level. The rally coincided with improving risk sentiment as well as reduced recession risks and expectations of stabilizing demand. Still, a more important influence has been on the supply side, where cuts by OPEC+ have effectively eliminated a sizeable production surplus in the global oil market. In- deed, total world crude oil supply is now estimated to be around 2.5 to 3.1 million bpd below its peak in November1. With prices now running generally in line with fundamentals, we expect that WTI and other global benchmarks are likely to trade side-ways over the next few quarters. In our view, any move above the top end of the US$60 to US$65 range is likely to prove short-lived. In such a scenario, we would expect supply to enter the market rather quickly. Risk sentiment has improved since late 2018 Heading into last summer, market participants were feeling quite optimistic about oil prices. By October, the price for a barrel of WTI and Brent oil had risen around US$16 and US$20 dollars Chart 1: Oil Prices Have Been on Quite the Ride US$/barrel Index 1941-43=10 100 S&P 500 Index (RHS) WTI (LHS) 90 Brent (LHS) 80 70 60 50 40 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Source: FT, CME, WSJ, EIA, TD Economics 3000 2900 2800 2700 2600 2500 2400 2300 80 75 70 65 60 55 50 45 40 Chart 2: Speculative Net Positoning in Oil Indicative of Improving Sentiment US$/Barrel Net Non-Commercial Futures Contracts* 800,000 700,000 600,000 500,000 400,000 300,000 200,000 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 * NYME Light Sweet Source: CFTC, CME, Bloomberg, TD Economics from the outset of the year, respectively. But with the start of autumn came an abrupt change of scenery. In a matter of 12 weeks, WTI fell from a high of US$76 to a trough of US$42, catching market participants and producers by surprise. Much of this change coincided with sudden souring in the global economic outlook and risk appetite. Since December, risk sentiment has notably improved, and was matched by a similar movement in oil markets. For instance, net non-commercial positions in oil futures (used as a proxy for speculative positions) have bounced back sharply, though not reaching the peak levels posted during last year’s price run-up (Chart 2). While the timing ofWTI’s drop and con

FAQs

What drove the recovery in oil prices since the start of the year?

A broad improvement in risk sentiment helped, but the more important influence was a tightening in the crude supply-demand balance as OPEC+ cuts and involuntary reductions reduced a prior production surplus.

Why does the outlook suggest recent WTI price levels are sustainable?

The document links sustainability to ongoing improvements in the supply-demand balance for crude, reflecting OPEC+ compliance with a 1.2 million bpd cut and additional reductions in other countries.

What is the forecast for WTI over the next two years?

WTI is expected to follow a relatively flat, range-bound profile between US$60 and US$65 throughout the next two years.

Oct 12, 2026

Uploaded by Bulrr