"Either some of the world’s biggest oil producers are more resilient to unfavorable price movements despite their overwhelming dependence on oil revenues, or the perception of a glut is exaggerated, and demand is healthier than most reports suggest." - Irina Slav, an oil expert that writes for OilPrice.com
Week after week the EIA reports that oil inventories in the U.S are below the 5-year average. What if the "glut" is just being promoted to keep inflation low, which BTW is working?
https://oilprice.com/Energy/Crude-Oil/Oil-Glut-Will-Prompt-Faster-Market-Rebalance.html
This is interesting: "That said, the resilience of oil producers has its limits. Saudi Arabia, for instance, has been issuing more debt to cover its budget spending amid weaker oil prices. The kingdom has also considered dropping some parts of its Vision 2030 plan because the price tag has gone too high.
What if there is no oil Supply Glut?
What if there is no oil Supply Glut?
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: What if there is no oil Supply Glut?
Notes below are from Josh Young at Bison Insights.
"Earlier this week, President Trump signaled that he wants oil prices to fall to $50 per barrel following U.S. intervention in Venezuela and the redirection of Venezuelan crude toward U.S. refineries.
At a surface level, this appears bearish for oil prices. History suggests, however, that when governments attempt to push prices down, the result is often the opposite over time. Producers respond to profit incentives, not policy preferences; if the price of a good is not high enough to generate an acceptable return, reinvestment slows, leading to declining production. That reduction in supply ultimately forces prices higher (and sometimes much higher). Oil is no exception."
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MY TAKE: If WTI oil does go down to $50/bbl and remain there for even a few weeks, we will see many upstream oil & gas companies slam on the brakes of their drilling programs. If well completions in the U.S. stopped (which will not happen), U.S. oil production would decline by an estimated 600,000 bpd each month. That is because most of our oil production comes from horizontal wells in shale plays. The wells come online at high rates, but they decline rapidly. Today, I don't believe we are completing enough new wells to hold production flat.
"Earlier this week, President Trump signaled that he wants oil prices to fall to $50 per barrel following U.S. intervention in Venezuela and the redirection of Venezuelan crude toward U.S. refineries.
At a surface level, this appears bearish for oil prices. History suggests, however, that when governments attempt to push prices down, the result is often the opposite over time. Producers respond to profit incentives, not policy preferences; if the price of a good is not high enough to generate an acceptable return, reinvestment slows, leading to declining production. That reduction in supply ultimately forces prices higher (and sometimes much higher). Oil is no exception."
-------------------
MY TAKE: If WTI oil does go down to $50/bbl and remain there for even a few weeks, we will see many upstream oil & gas companies slam on the brakes of their drilling programs. If well completions in the U.S. stopped (which will not happen), U.S. oil production would decline by an estimated 600,000 bpd each month. That is because most of our oil production comes from horizontal wells in shale plays. The wells come online at high rates, but they decline rapidly. Today, I don't believe we are completing enough new wells to hold production flat.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group