RE:Forecasting oil prices is a mugs gamesteadyprofictss wrote: and some folks have looked at historical forecasting and proven that statistically. The strip month moves around the front month all the time. Trouble is the months more than 3 or 4 months out don't have any volume, so what does a contract tell you that hardly trades. Fact is folks can move those around at will because there is no liquidity. Anyone that understands statistical analysis knows that the most basic number is the size of the population sample, that determines the accuracy of the sample. Given how few contracts trade in the out months any forecast based on those months will not be reliable The entire '16 contract volume here is just 13% of the front one month contract for Aug '15. The strip if you pay attention to it over time tells you very little, it moves with same sentiment that impacts the front month. 
Fact is in my experience no one has a handle on forecasting oil prices much further out than a few months and even then there can be a wide variance in pricing comparing actual to predicted on a percentage basis. Certainly not enough accuracy to buy and sell stocks on that info. I'm not alone in coming to that conclusion. This is backed up by some pretty sophisticated studies looking at past oil forecasts and actual's. Much discussed in this book the Handbook of Economic Forecastingstarting at pg 427...after studying oil forecasts/ actuals which utilized many models and tools (including futures contracts) the authors basically came to the conclusion they were pretty much unreliable. Knowing that the futures contract is unreliable as a predictor of price is probably far more important to an investor than jumping to conclusions based on "expert" interpretation of them which can get you into trouble in the market. Experts as a whole tend to have pretty bad track records in the oil market and elsewhere, that's a fact.
The problem is that regardless of how unreliable and volatile forward strip prices are the NAV of Oil and Gas producers are largely based on them.
At least once a year normally at year end the producers are required to re-evaluate their assets based on the forward strip prices among other things.
In early 2015 there was a round of “non cash” write-downs in the industry.
The forward strip prices have deteriorated considerably since then. If there is not a substantial improvement by YE 2015 we will see another round of asset devaluations.
Although these are “non cash” write-downs they have a major impact on NAVs, Share Prices and can cause Debt Covenant problems.
As Always; Do Your Own Due Diligence; It’s Your Money !!