This morning the Houston Chronicle ran an article in the business section about tightening supply/demand for crude oil. They quoted a research report from Barclays Global Energy Team. Below is an Executive Summary from Barclays. If you want to read the report (154 pages) send me an e-mail and I will forward it to you. dmsteffens@comcast.net
BTW I get a lot of oil and gas price forecasts. Raymond James is the only firm forecasting much lower oil prices in 2013. RJ thinks the three major oil fields in the U.S. (Bakken/Three Forks, Eagle Ford and Permian Basin) will generate so much growth they will lower global oil prices. I do not agree and so far no one else does.
From Barclays:
The key difference we see between oil and most other energy markets is supply, where the
challenge is replacing declining oil production. Demand, by contrast, responds to economic
weakness to similar degrees across the energy spectrum. And with 3Q12 looking as if it will
see a very significant tightening of the oil market, our key Global Energy Outlook
recommendation is to stay leveraged to oil and to oil-biased equities and credits.
Beyond our quarterly and annual oil price forecasts, we map the longer-term
supply/demand picture, and the signals here are stark. Oil supply from existing fields is
falling by close to 4m bls/d per year due to natural decline; global demand is rising by more
than 1m bls/d each year, even in the current weak environment. Hence, the supply gap that
needs to be filled each year from new fields is more than 5m bls/d. This presents a material
challenge for the energy industry. While this long-term supply squeeze may have been less
apparent in the quarter just past, 3Q12 looks as if it will see a significant tightening of the oil
market, with a 2m bls/d upswing in demand and falls in both OPEC and non-OPEC supply.
To this we can add minimal spare capacity and heightened geopolitical tensions in several
regions. A release of US strategic reserves would provide only a slight and temporary
respite. Thus, we continue to have strong oil price conviction, and our Brent forecast for
2013 is $125/bl. For the longer term, we expect prices to follow an inexorable, if volatile rise
to above $180/bl before the decade closes.
Barclays' Take of oil prices
Barclays' Take of oil prices
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Barclays' Take of oil prices
In E&P equities, we (Barclays) recommend Afren, Baytex, Crescent Point, EOG Resources, Noble Energy, Petrobakken, Plains Exploration, Tullow Oil and Whiting Petroleum. Of the integrateds, we recommend BG, CNOOC, GALP, Imperial and Suncor. In credit, we retain our preference for Canadian integrated names, notably Suncor Energy and Cenovus, and also see upside for BP. In high yield, we favour oily E&Ps, including Hilcop, MEG Energy, Plains E&P and SandRidge Energy.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Barclays' Take of oil prices
With US shale oil volumes growing in the double digits, the current infrastructure is
inadequate to handle the influx of new volumes. MLP-driven “yield cos” such as Oneok,
Targa Resources and Williams Companies provide high yield, attractive ways to participate
in this build out. All offer 15% plus dividend growth off robust current yields.
inadequate to handle the influx of new volumes. MLP-driven “yield cos” such as Oneok,
Targa Resources and Williams Companies provide high yield, attractive ways to participate
in this build out. All offer 15% plus dividend growth off robust current yields.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Barclays' Take of oil prices
fwiw---
cnbc reported today that Deutsche Bank was forecasting $70 wti next year based on increasing supply vs bad signs from china etc.
cnbc reported today that Deutsche Bank was forecasting $70 wti next year based on increasing supply vs bad signs from china etc.