Tuesday, September 26, 2017

Oil Prices To Remain Flat -- Boston Energy -- September 26, 2017

Active rigs:

Active Rigs583471190184

RBN Energy: recent developments in Russia crude and refined product exports.

Snagged: Bass Pro completes $4 billion acquisition of Cabela's.

Prepare For Oil Shortage -- Citigroup

  • five countries in the OPEC group may be already pumping at maximum capacity: Libya, Nigeria, Venezuela, Iran, and Iraq
  • rather than a surge in output, there's "a risk of a market squeeze" emerging as early as 2018
My comment: any shortfall less than 3 million bopd will easily be met by US. I lean with Boston Energy, see below.
Oil Price Outlook Unchanged -- Boston Energy

Link: http://www.rigzone.com/news/article.asp?hpf=1&a_id=151853&utm_source=DailyNewsletter&utm_medium=email&utm_term=2017-09-26&utm_content=&utm_campaign=feature_2

  • outlook for oil prices has not changed
  • oil prices likely to remain flat well into 2018
  • surplus oil inventories ahve declined significantly but a large surplus to the five-eyar average will likely remain for the rest of the year
  • a significant increase in inventories is even likely in 2018 with the seasonal decline in global demand
  • but in 2020 and beyond, the risk of an oil shortage remains high
  • forecast:
    • near $50/bbl: into 2018
      • average bout $51 in 2018 (vs average $50 in 2017)
  • Brent/WTI spread:
    • through August, $2.01
    • spread dramatically in the aftermath of Hurricane Harvey
  • inventory rebalancing is underway, but at a much slower pace than originally anticipated
  • OPEC had forecast an increase in oil prices to $60-65/bbl with re-balancing
US production growth will keep surplus inventories high
  • see link, lots of data
  • US production remains robust; will meet all US demand well into 2018
  • US producers have adjusted their 2017 capital budgets to a $51/bbl WTI oil price but left their 2017 production guidance intact
  • increased drilling efficiencies, resulting in better breakeven prices:
    • Permian Delaware and Midland sub basins: $33/bbl
    • Williston Basin: $33/bbl
    • Eagle Ford: $34/bbl
  • then this:
    • But in the long run, Pioneer Resources, a leading producer in the Midland basin, said in a recent presentation “$50 oil isn’t going to get it done” because it doesn’t generate enough cash flow and the industry has too much debt. “U.S. production may grow for 2-3 years and a few independents may grow, but we are in a $60 long term price environment.”
Non-OPEC production outlook flat outside the US
  • see link
OPEC production is higher than it anticipated when it announced its cut
  • see link
  • Iraq is the biggest cheater, consistently exceeding its limits
  • 4.45 million bopd vs quota of 4.35 million bopd
  • plans to increase production to 5.0 million bopd
Adequate future world oil supply requires higher prices
  • see link
My comment: fundamentals suggest that prices for crude oil will remain flat but the question is whether speculators will push the price of oil toward $60 over the next 12 months.

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