Economics 101 says too much supplies lowers price. There are just too much oil drilling going on right now int the Bakken and Eagle Ford. The supplies is overwhelming refining capacity for the light oil. I'm long VLO that can buy cheap Bakken oil and then sell gasoline domestically and export it to Europe as well. Watch by third quarter... Bakken drillers are going to sink fast.
The Bakken oil is displacing Arab oil on the east coast. Shipping by rail to Albany,NY loading on barges and going to the refineries in Phily. There are thousands of rail cars at the Port of Albany: I passed them by on Hwy 787 . As long as the oil is cheaper than Arab oil it will continue annd I see OPEC just voted to do nothing on price until Nov meeting
Bakken oil is light oil. The Saudi oil is heavy. Refining capacity for light is is maxed out. Therefore, if they can't process the oil, the price has to come down. And Eagle Ford is closer to the Valero refinery than Bakken. Therefore the further North you are, the cheaper the oil.
One more thing, due to more fuel efficient cars, there is less demand...so again supplies overwhelms demand and demand in the fall and winter will be lower as you know. So by 3rd quarter there will be panic for the Bakken drillers.
Some cars may be more efficient but I like my big, high powered V-8, made in America, by Americans using tools, not chop sticks. A bonus: The Balance of Trade deficit doesn't suffer because I bought foreign. And I only use Sunoco gas, who does not buy from the Arabs.
Your thesis assumes stability in the Middle East, an impact-free hurricane season for the GOM producers, and decreases in demand in both India and China. For OAS, you assume that the increases in their oil production (while decreasing their costs of production) will not offset the anticipated price decline. How low do you foresee oil prices going?