Crude Projection

Excerpts from Bloomberg:

OPEC Expands Oil Rig Drilling the Most Since 2007

March 15 (Bloomberg) -- OPEC is increasing oil drilling at the fastest rate in 2 1/2 years, even as production exceeds its quotas by the equivalent of a supertanker of crude a day and delegates prepare to pledge no increase in output.
The 12-nation group boosted its number of oil and gas rigs by 8.4 percent in January and February, the biggest two-month gain since June 2007, data from Baker Hughes Inc. show. OPEC members excluding Iraq pumped 26.8 million barrels a day last month, 1.9 million more than targeted, data compiled by Bloomberg show. Shipments will rise again this month, according to tanker-tracker Oil Movements.
While oil prices recovered from a four-year low at the end of 2008 as OPEC announced a record supply cut, excess production means the doubling in oil prices since then may have run its course, according to the Centre for Global Energy Studies and Commerzbank AG. The premium charged for crude deliveries in 2015 has plunged 43 percent in three months, indicating investors are less concerned of future shortages.
“OPEC will have to show its mettle,” said Leo Drollas, deputy director of the CGES in London, which was founded by former Saudi oil minister Sheikh Zaki Yamani. The consultant predicts Brent crude will fall 25 percent to $60 in the fourth quarter of this year. “If they can’t hold discipline, we’re looking at prices going to $50 by 2015.”


As we mentioned in a previous blog post here we expect crude to drop to the $60 range or lower within the next few months.  As a consequence, we anticipate the Canadian dollar and TSX will drop substantially as the US dollar rises.  
One major recent development that may change this projection are recent reports about US military activity on the island of Diego GarcĂ­a in the Indian Ocean.  If the US strikes Iran over its nuclear weapons program within the next few months, potential disruption of crude transported through the Strait of Hormuz will like drive the price up instead.