The International Energy Agency (IEA) recently said: “Oil’s downward spiral to fresh six-year lows below $50 a barrel has dimmed the prospects for a recovery in U.S. drilling activity. Unless oil prices bounce back in coming months, U.S. shale oil production is forecast to fall by 385,000 barrels a day next year to 3.9 million barrels a day.”
BTW U.S. shale oil production has never been a real threat to OPEC. The most optimistic forecasts I've seen had U.S. shale oil production peaking at around 10 million barrels per day. At some point the upstream companies will have drilled up the Tier One acreage and they will not be able to drill enough wells to offset falling production from previously drilled wells. Prior to 2015, 50,000 horizontal shale wells were completed. Those wells are all on steep decline. This year we will complete ~10,000 new horizontal shale wells and production is declining by ~80,000 barrels per day each month in the shale plays. To confirm this see: http://www.eia.gov/petroleum/drilling/#tabs-summary-2
My advice to OPEC is to stay the course until year-end. U.S. companies set their capital expenditure budgets for the next year in November and the first half of December. I worked for Hess for 18 years and sat in on many of the budget meetings. Once the budgets are made public, they will not be changed easily even if oil prices do increase. Oil & gas prices will have to stay high for several months before the upstream companies are comfortable increasing their drilling budgets.
Keep in mind that the number of rigs drilling for oil (~600 today) needs to be at least 1,000 just to keep U.S. production flat. Therefore, even if oil prices spiked to $80/bbl tomorrow it will take over a year to reverse the decline on U.S. production. Therefore, OPEC will have gotten the market share they desired.
PLUS, global demand for refined products is now going up by 1.4 to 1.6 million barrels per day each year. EIA recently said global demand for oil will exceed supply by late in 2016. I think it will happen sometime in Q2 2016.
My advice to OPEC
My advice to OPEC
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: My advice to OPEC
OPEC’s September report calls for higher demand for OPEC oil as non-member production declines
OPEC sees a balanced market in 2016
OPEC Secretary General Abdalla Salem el-Badri said the group expects production from outside the group to continue declining, thus leading to a stable market in 2016. “At OPEC, we are hopeful that the industry will see a more balanced oil market in 2016. We have recently seen a contraction in production from some non-OPEC producers and an uptick in demand growth,” he said.
The gap in oil supply and demand is due to close in the third quarter of 2016, Mohammad Ghazi al-Mutairi, CEO of state-run Kuwait National Petroleum Co., said at the Kuwait conference. Prices have bottomed and there are signs of a recovery in 2016, according to Qatar’s Energy Minister Mohammed al Sada.
Read:
http://www.oilandgas360.com/oil-retreat ... 3-26401157
OPEC sees a balanced market in 2016
OPEC Secretary General Abdalla Salem el-Badri said the group expects production from outside the group to continue declining, thus leading to a stable market in 2016. “At OPEC, we are hopeful that the industry will see a more balanced oil market in 2016. We have recently seen a contraction in production from some non-OPEC producers and an uptick in demand growth,” he said.
The gap in oil supply and demand is due to close in the third quarter of 2016, Mohammad Ghazi al-Mutairi, CEO of state-run Kuwait National Petroleum Co., said at the Kuwait conference. Prices have bottomed and there are signs of a recovery in 2016, according to Qatar’s Energy Minister Mohammed al Sada.
Read:
http://www.oilandgas360.com/oil-retreat ... 3-26401157
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group