Oil Plunges To $45 Handle As JPM, UBS Slash Price Outlook

The dead-cat-bounce of May is now officially dead as WTI plunges back to a $45 handle this morning amid growing concerns about the slowness (or lack) of rebalancing in the market.

Crude snapped…

Erasing all the hope of the OPEC Extension deal…

Overall trend in prices is downward, says Michael Hewson, analyst at CMC Markets. “You couldn’t have made up those numbers yesterday. Down is the line of least resistance” Says intraday lows for this year are key levels to watch on both contracts.

Furthermore, multiple shops are downgrading their oil price outlooks including UBS:

And JPMorgan (as OilPrice.com’s Tsvetana Paraskova notes), the U.S. shale-vs-OPEC-cuts tale has been the predominant theme in oil markets this year, and like the cartel’s output cut, it will be rolling over into next year as well.

Major banks, the same that at the time of the initial OPEC deal were seeing the markets tightening and glut eliminated as soon as the second or third quarter this year, have started slashing their oil price forecasts for this year and next, as the six-month OPEC deal failed to rebalance the markets and cuts were extended into March 2018.

U.S. shale production is expected to continue growing through this year and into next year. Meanwhile, JP Morgan sees OPEC’s extension deal as having no exit strategy, with the cartel not communicating what its end game is.

“Neither the length of the extension, nor the compliance rate of its participants, concerns me as much as OPEC’s lack of an exit strategy. If OPEC really has the courage behind their convictions, then the optimal decision would have been to extend cuts through the end of 2018,” Ebele Kemery, head of energy investing at JP Morgan, said on the day on which OPEC announced they would roll over the cuts.