Analyst Cuts FY15 Oil Price Forecast 20% Amid Continued Glut

OPEC's recent decision to maintain current production suggests a supply glut will continue through much of next year, an analyst said Monday. But in the face of an ongoing oil glut, "equity pricing will be difficult" Barrington's Rudolf Hokanson said in a note in which he slashed his price targets on a raft of oil stocks by an average of about 25 percent. Hokanson also cut his 2015 forecast for the average price of West Texas crude by 20 percent, to $70 a barrel and said the oil glut is likely to continue "for the next several quarters." "We expect oil stocks to remain volatile" and under-capitalized independent producers will become "pressured by lenders," Hokanson said. OPEC on Thursday left in place a daily quota of 30 million barrels per day. U.S. oil production in the third week of November totaled 9.08 million barrels per day, versus about 8 million for the same period a year ago. Seasonally, the first half of the year is weakest for oil demand, and Hokanson said it's likely that OPEC will convene its next meeting in the spring. "As OPEC watches global dynamics, we believe it will at least act in its own best interests" Hokanson said, although he didn't specifically predict a cut in production. Two exchange-traded funds in the oil sector are both off more than 9 percent since Thursday: Vanguard Energy ETF

traded recently at $114.66 a share; Energy Select Sector SPDR

was changing hands at $80.13. Hokanson cut his target Monday on Continental Resources, Inc.

to $62 from $85; on Newfield Exploration Co.

to $43 from $47; on SM Energy Co.

to $69 from $102 and Whiting Petroleum Corp.

to $81 from $122. http://www.benzinga.com/analyst-ratings/analyst-color/14/12/5045687/update-barrington-research-reiterates-on-continental-res http://www.benzinga.com/analyst-ratings/analyst-color/14/12/5045721/update-barrington-research-reiterates-on-newfield-explor http://www.benzinga.com/analyst-ratings/analyst-color/14/12/5045751/update-barrington-research-reiterates-on-sm-energy-compa http://www.benzinga.com/analyst-ratings/analyst-color/14/12/5045755/update-barrington-research-reiterates-on-whiting-petrole