Yahoo Finance Oil 'mega bulls' tamed in 2023: RBC survey
Most respondents now see the price of WTI ending 2023 at between US$70 and US$90
Oil "mega bulls" have been tamed in 2023, according to a new RBC Capital Markets survey showing the most optimistic forecasts for U.S. benchmark crude prices fell more than 90 per cent since November.
More than two-thirds of the bank's latest bi-annual oil market and corporate survey respondents noted "difficult" or "extremely difficult" conditions for trading and investing so far this year.
"Fundamentals are tricky and sentiment is fleeting," analysts led by RBC commodity strategist Michael Tran wrote in research published on Thursday. "Uncertain macro backdrop, limited liquidity and risk deployment, OPEC+ policy, China's reopening, a decade of underinvestment, looming recession. [Are we] missing anything?"
Most respondents (60.4 per cent) now see the price of West Texas Intermediate (WTI) (CL=F) ending 2023 between US$70 and US$90. In the November survey, 64 per cent called for WTI to settle above US$90 at the year's end. The most bullish forecasts, US$110 and above, fell from 25 per cent in November to just 1.6 per cent when the survey closed on May 19.
"The right tail, or mega bulls, have been tamed," Tran wrote. "Everyone's view has been tested by the volatility this year, but commodity hedge funds and trading houses have remained our most bullish group, but not without their lumps."
A recession or a weakening macroeconomic backdrop was the most widely-cited downside risk over the next six to 12 months (64 per cent). A weaker-than-expected reopening of China's economy was a distant second at 11.9 per cent.
Looking to the upside, 22 per cent say "steadfast demand despite overblown recessionary fears should push prices higher," a view the RBC analysts agree with. Supply concerns driven by years of underinvestment in the sector was the most bullish catalyst for 21 per cent of respondents. China's reopening was chosen by 9.4 per cent. However, 74 per cent say the reopening theme is too hard to quantify, or will be offset by economic weakness elsewhere.
"Not surprisingly, 44 per cent of respondents suggested that they are either not, or unsure about, deploying further risk into the space through the balance of the year," Tran wrote.
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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