Oil Supply / Demand

[dan_s]

More and more analysts are noticing that Non-OPEC oil production is on decline and that the rate of decline will accelerate. Market forces have pulled so much capital from the upstream companies and D&C activity has dropped off a cliff. The big drop in the active rig count in Q1 will show up in a big drop in production in Q3.

OPEC's own report now says that Non-OPEC production must increase from Q3 to Q4 to meet global demand. In the report, they expect U.S. oil production to increase 500,000 barrels per day from Q2 to Q4. I can assure you that will not happen. Even if oil spikes to $60/bbl tomorrow, U.S. production will keep falling. OPEC must believe we have a lot of wells choked back. We don't. Upstream companies will not ramp up capital expenditures this year enough to stop production from falling. I worked for a big upstream company (Hess) and I assure you that public company boards do not change the annual budget once it is set. They will not approve more spending until they are SURE higher commodity prices are here to stay for awhile.

Read this article for more on this topic: http://oilprice.com/Energy/Energy-Gener ... bound.html

Terry Starling from Raymond James is opening our meeting on April 25 in Houston. Raymond James is forecasting WTI will average $60/bbl in the 3rd quarter, hitting $50/bbl early in July and ending the quarter at $70/bbl. I have been gathering forecasts from other analysts to see how they stack up with Raymond James. TPH thinks the global oil markets are already very close to balance and predicts we will see draws from storage in May. TPH's David Purcell predicts $80 WTI by year-end. Credit Suisse also predicts a big spike in gasoline and diesel in May.

BTW none of these analysts think anything productive will come out of the meeting in Doha, Qatar on Sunday. At best, an agreement to freeze production will put a floor under the oil price and show that OPEC + Russia are "talking". Since 2/3s of the OPEC members cannot increase production anyway, it is easy to agree on a freeze. Many analyst think Russian production peaked in January.

Read the article above.

[dan_s]

The latest figures from the American Petroleum Institute (API) reveal a 70 percent annual decline in new natural gas well completions along with a staggering 90 percent drop in new oil wells as of the start of April.

Read: http://oilprice.com/Energy/Crude-Oil/70 ... l-Gas.html

[dan_s]

In this article, Dan Dicker explains why he believes oil will be over $100/bbl heading into 2018.

"While I am nearly alone in these forecasts, they are not just pulled out of space, but with deep regard for the fundamental supply/demand picture that everyone mostly agrees upon, combined with what I think is a deeper insight into the likely trajectory of oil company leverage, financing and the role of financial oil derivatives."

http://oilprice.com/Energy/Oil-Prices/1 ... -2018.html

MY TAKE: Dan points out that most analyst put all of the blame for the recent over-supply problem we've had the last two years at the feet of the shale oil producers. They also expect the shale oil producers to solve the problem; like everything else in the world is a steady state. U.S. shale production is only 5% of global oil production. It is ridiculous to think that such a small slice of the pie could have such an impact. There is ZERO CHANCE, no matter how high the price of oil rebounds, that shale oil production can meet all future demand growth. The most optimist forecasts that I saw (when oil was over $100/bbl) was that U.S. shale production would peak at 10 million barrels per day. By 2020 global demand for oil will be over 100 million barrels per day.