Without high geopolitical risk or an actual supply reduction, oil prices have a downside risk. The spike in oil prices since August provides U.S. producers an attractive opportunity to hedge their 2018 capital program. With a typical lag, it will likely result in an acceleration in U.S. oil production growth starting 2Q18. Coupled with a seasonal dip in global demand in 1Q18, which will cause sizable excess oil inventories to increase, a correction in oil prices is likely. Surplus oil inventories are likely to remain through 2018, taking the steam out of the recent upward momentum in prices without an actual supply disruption. Inventories will still be above the 5-year average in 4Q18, but smaller. WTI is $58/bbl in response to increased geopolitical anxiety, up from an average of $49.33/bbl for the first 9 months in 2017. Without high geopolitical risk or an actual supply reduction, oil prices have […]