U.S. Oil Production Update - Mar 11

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U.S. shale collapse will lead to higher oil prices . OilPrice.com 3/11/2020

U.S. shale growth is about to decline, becoming an immediate victim of the Saudi-Russian price war. Saudi Aramco said that it would increase oil production to 12.3 million barrels per day (mb/d) in April, a shocking escalation of the war for market share. That level of output is believed to be beyond what Aramco can produce on a sustainable basis. In other words, Saudi Arabia is going all-out to flood the market. As a result, the immediate victim will be U.S. shale. “Oil prices should bottom out when producers begin physically shutting in wells, which is indeed what set the floor four years ago,” the investment bank added.
The reaction was swift. With share prices in freefall, the number of shale companies announcing budget cuts multiplied at the start of the week. Diamondback Energy and Parsley Energy immediately announced plans to cut spending and reduce drilling activity. “Many US fracking companies already had their backs to the wall before the price slump due to high debts and financing difficulties,” Commerzbank wrote in a note. “Drilling activity declined continuously until mid-January, and has since stagnated at a low level.” The one-two combo of the coronavirus pandemic and the Saudi-Russia price war could deliver a knockout blow to U.S. shale. But perspectives on the impact on production vary. JBC Energy said that they “prefer a more cautious call on US supply declines,” adding that it may take a few months before production begins to fall.

Read more: https://oilprice.com/Energy/Oil-Prices/ ... rices.html
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We will be publishing the March newsletter next week. I will be adjusting all stock valuations, but know that this "Oil Price War" creates a whole new level of uncertainty. A member of the Raymond James Energy Sector Team will be our opening speaker at our April 8 Hess Club luncheon.