The Energy Space

Energy Price Outlook

Although small bounces in oil prices are possible at any time given the market's increased volatility, we expect the market to generally trend lower over the next few weeks. WTI could reach $80/bbl while Brent could fall toward $100/bbl. The election results were the largest cause of the selloff yesterday in our opinion and present an ominous view for demand going forward. We had anticipated a recovery in the market going into the election based on increased clarity, and accompanied by upside follow-through on a Romney victory. However, the discourse in Washington and the stagnant growth of the last few years appear likely to continue, which should weigh on demand. Pressure on prices could also come from possible increased regulations, carbon taxes, and higher investments in alternative fuels. Potential upshots for oil would be seen if a deal to avoid the fiscal cliff is struck and/or the president governed from the center. Neither appear to be likely at this point.

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