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As the year is winding to a close, we at Stratas Advisors wanted to provide an overview of what we’ve seen in oil markets and what is setting up to happen next year. In the below video, we look at key themes from the year, our underlying fundamental expectations and how we derive those, how high prices have had a divergent impact on OPEC and US E&Ps and what this means for an OPEC extension. We also look at some bigger picture items including the rising impact of externalities on crude and what we’re watching in the long-term.
The most important thing to keep in mind for the year ahead is that while prices are firming, all market participants will not benefit equally. The disconnect between US and international pricing will hamper US growth. Over-exuberance could push too much cash into markets, setting up for a price correction that is more likely to impact the US given the pervasiveness of hedging programs here. Demand growth is secure next year, barring major weather events and it will really be the pace of supply growth that dictates the path prices take. And overall, US producers will continue to face more headwinds than their international counterparts.
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