Energy Prospectus

Here is a link to my article on OilPrice.com: https://oilprice.com/Energy/Crude-Oil/O ... n-End.html

"U.S. production is indeed soaring, but it doesn’t appear to be swamping the market, at least as of now. A variety of analysts have argued that oil demand is so strong that the market will continue to tighten, even after considering the explosive growth of U.S. shale. “This year will be the eighth year of continuous growth since the Great Financial Crisis; and the seventh consecutive year of annual growth of more than 1 million b/d,” Wood Mackenzie said in a note. “Our latest forecast suggests that demand for crude oil will grow by 1.7 million b/d in 2018, the fifth-highest this century.”

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As long as OPEC keeps the current production limits in place, the oil market will continue to tighten, even after taking into account U.S. shale growth. And OPEC has even signaled that it is considering extending the cuts for another six months, pushing the expiration date to mid-2019. If they follow through on that, there is a pretty decent chance that there is a lot more room on the upside for oil prices.

Still, there are a handful of uncertainties that would completely upend any reasonable oil forecast. On the bearish side, if OPEC somehow abandons its cuts, begins a phase out sooner than expected, revised the deal to account for sharp declines in Venezuela, or members simply started cheating, then oil prices could slide significantly.

But, arguably, there are more upside risks. The most dangerous is the likely return of sanctions on Iran from the U.S., which could curtail a significant chunk of supply. Worse, the Trump administration could head down a dangerous road that ends in war. Meanwhile, Venezuela’s oil production continues to fall off a cliff.

In short, because U.S. shale growth is already baked into the current oil market projections, the risk to oil prices is probably skewed more towards the upside due to the variety of geopolitical ticking time bombs.

By Nick Cunningham, Oilprice.com