Crude Oil Prices
Posted: Mon Sep 22, 2014 10:02 am
As I have posted here many times, September is a "soft month" for oil demand. I believe the low for crude oil prices will be set in September and prices should firm up during the 4th quarter. I also believe OPEC will make moves to support Brent prices since they really need the money to support their social programs. Unless peace breaks out across the Middle East and North Africa, there is going to be supply risk from that region. At least one analyst at Morgan Stanley agrees with me. See note below.
Dan
E&P Weekly: Crude Focus
Evan Calio – Morgan Stanley
September 22, 2014 4:01 AM GMT
We remain constructive on oily E&Ps and are buyers of the weakness. We see muted risk into peak US turnarounds (which were reduced significantly this week) and a better risk-reward to Brent oil price as supply fears appear overblown.
Commodity fears dominate current investor mindshare. We believe crude supply and demand dynamics are tight into 2015, supporting price vs. current supply driven fears.
Last week, Libyan production, one of the recent bearish concerns, dropped ~170mboe/d (to ~700mboe/d). The El Shahara field was shut-in due to a rocket attack and reinforces our view (last week’s weekly) that Libya’s production remains fragile and production has returned as the political situation has worsened. We believe that, if needed, in the medium term, OPEC will rebalance the market and absorb potentially increased production from Iran and Libya. This view was reinforced last week when Abdallah El-Badri, OPEC's Secretary General, stated that he expects the group to lower its oil output target when it meets in Nov. While difficult to make a short-term call given uncertainty of near-term oil prices and momentum, we believe oil prices and E&P's risk-rewards are favorable over the medium- to longer term.
Dan
E&P Weekly: Crude Focus
Evan Calio – Morgan Stanley
September 22, 2014 4:01 AM GMT
We remain constructive on oily E&Ps and are buyers of the weakness. We see muted risk into peak US turnarounds (which were reduced significantly this week) and a better risk-reward to Brent oil price as supply fears appear overblown.
Commodity fears dominate current investor mindshare. We believe crude supply and demand dynamics are tight into 2015, supporting price vs. current supply driven fears.
Last week, Libyan production, one of the recent bearish concerns, dropped ~170mboe/d (to ~700mboe/d). The El Shahara field was shut-in due to a rocket attack and reinforces our view (last week’s weekly) that Libya’s production remains fragile and production has returned as the political situation has worsened. We believe that, if needed, in the medium term, OPEC will rebalance the market and absorb potentially increased production from Iran and Libya. This view was reinforced last week when Abdallah El-Badri, OPEC's Secretary General, stated that he expects the group to lower its oil output target when it meets in Nov. While difficult to make a short-term call given uncertainty of near-term oil prices and momentum, we believe oil prices and E&P's risk-rewards are favorable over the medium- to longer term.