The purpose of economic forecasts

Last Dec. 17: "Expect Oil Prices To Spike To $60 In Q1, But Then Crash Again" After reciting all the reasons that the OPEC production cut will not have much of an effect on oil supply or prices, the article says,

However, in the first quarter, we expect crude oil prices to trade higher to $60 a barrel, as news of the OPEC nations maintaining their quotas will provide a temporary boost. These higher levels are unlikely to be sustained, though.

So we turn to oilprice.com where we see this chart for Brent crude (which sells at higher prices than most other sources):

The high-low-last-change numbers at the top are the current trading session, I grabbed this chart and the WTI chart below about five minutes after market open here in the US.

Brent's highest closing price so far this year was $56.71 on Jan 3. Here is WTI crude. It's 23017 high was $54.12 also on Jan. 3.

Back to the original December forecast:

On the downside, the floor for crude oil prices is $52, $44 and $36 per barrel levels. After the initial jump, crude is likely to trade below $52 a barrel for most of the second half of 2017.

Well, oil has already met the sub-$52 target. Maybe that's why "OPEC Offers Olive Branch To U.S. Shale." Shale extractionm especially in the US, is what has kept oil prices from soaring since OPEC announced deep production cuts in 4Q 2016 that took effect on Jan. 1. Key sentence:

The supply reduction of 1.2 million barrels per day, plus almost 0.6 mb/d from non-OPEC countries, is helping to bring down global inventories, but at a surprisingly slow pace. The comeback of U.S. shale is undermining the effectiveness of the deal.

Yep. And the oil price at which shale becomes profitable j keeps dropping, too. I explained (somewhat) the economics of shale extraction in "Nuking shale will make fracking obsolete," which also covers the impact of microwave, waterless technology on the industry.

Update: Petroleum geologist Arthur E. Berman wrote after trading closed today,

WTI futures fell $2.86 from $53.14 to $50.28 per barrel, and Brent futures dropped $3.81 from $55.92 to $52.11 per barrel. WTI is trading below $49 and Brent below $52 per barrel at the time of writing.

The apparent cause was a larger-than-expected 8.2 million-barrel (mmb) addition to U.S. crude oil inventories.

Based on history, we can see that this was an over-reaction. WTI has fallen below the $50 to $55 per barrel range in which oil futures have traded for the last 3 months.
 
An 8.2 mmb addition to crude oil storage is actually fairly normal during the annual re-stocking season that we are in now (Figure 2). Inventories increased 10.4 mmb during this week in 2016 and the 5-year average for this date is 5.3 mmb.

The fact that inventories have been in record territory since the beginning of 2015 has not kept oil futures from going through several rallies or from trading near $55 per barrel since November. 

Well, I can economic forecast with the best (or worst, can't really tell the difference) of them, so here goes:

The US Oil Fund (USO, an ETF surrogate for tracking crude price movements) opened today at $10.58 per share, down about 9 cents from Wednesday's close of 10.675. After dropping to 10.32, USO rallied in the afternoon to close today at 10.53.

I predict that crude will rise in price tomorrow, but not to its prior level of only last Tuesday. USO will top out no higher than $11.00 or a few cents more, then we'll see sideways burbling for awhile as the markets and speculators try to find the new normal. I think that WTI will finally plateau for awhile at about $50.50 and Brent at about $53. But my time frame extends no further than the end of next week.

Disclosure: I am not invested in USO so don't take any of this as advice. The oil markets just happen to fascinate me for some reason. It's just a hobby.