Bullish Signal for Oil Prices

[dan_s]

In its Oil Market Report sent to clients today, DNB Bank’s Oslo research team led by oil market analyst Torbjørn Kjus, said “we now believe prices have dropped to unsustainably low levels and our oil price forecast is now bullish vs the whole forward strip.”

In its analysis, DNB sees the 20%-30% CapEx spend cut that is ripping through the oil patch in 2015 continuing into 2016.

“We believe the CAPEX cuts will be even larger in 2015-16 than what we saw in 2008-09 and the effect on net decline rates could be quite meaningful.”

See full article at: http://www.oilandgas360.com/dnb-sees-bu ... 9-26401157

[dan_s]

“The oil market is currently only focusing on bearish news and seems to ignore bullish data,” Kjus said in a research note emailed to clients with the report. “Lower prices are for example set to stimulate demand growth in the two largest consuming nations, China and the US. In fact we can already see it in the reported numbers.”

DNB Sees Bullish Signals in the Shale Patch - Oil & Gas 360DNB cites Sanchez Energy’s (ticker: SN) well cost reduction to $5 million from $7.5 million, driven by oil service price reductions and increasing efficiencies. “That particular company is now guiding a CAPEX cut of 63% by the way, from $1.15 billion USD to $425 million USD. This CAPEX cut results in a drop in rigs from 7 to 3 and average production for 2015 is guided to be equal to the Q4-2014 production at 40-44 kbd. In other words, the company looks set to maintain output at approximately the current level even with the 63% cut in CAPEX. If this kind of behavior is representative for the broader shale industry, the oil supply-demand balance will fix itself during 2015 if shale production stops growing.”


NOTE: U.S. conventional oil production has been on steady decline for many years. If shale production stops growing, total U.S. production will be on decline by year-end.

[ChuckGeb]

I think if you look at Sanchez's press release, they project a 40% production increase in 2015 despite the huge cut in capex.

[bearcatbob]

I think if you look at Sanchez's press release, they project a 40% production increase in 2015 despite the huge cut in capex.

How do their 2014 and 2015 exit rates compare. A company can have declining production and a higher year over year production.

Bob

[ChuckGeb]

Got it they are projecting flat production compared to its 2014 exit rate. Still not a reduction but not a substantial increase.

[dan_s]

The only reason SN production will be up in 2015 is because of the big acquisition from Shell in Q3.

Daily production:
2014
Q1A = 18784 boepd
Q2A = 20427 boepd
Q3A = 38613 boepd
Q4E = 41,000 boepd with exit rate near 42,000 boepd

2015 guidance provided by SN on 1/8/15 was 40,000 to 44,000 boepd (42% oil, 29% NGL, 29% gas)

This is what I am seeing from a lot of companies. There production will only be up in 2015 because their goal is to hold production flat to Q4 2014 actual.

I am now expecting U.S. production to start declining in Q3 2015. If so, oil prices will go a lot higher or this world is heading for a HUGE fuel shortage.

[Lemonhawk]

So what is it that he knows.......

Saudi prince: $100-a-barrel oil 'never' again

Q: Will prices continue to fall?

A: If supply stays where it is, and demand remains weak, you better believe it is gonna go down more. But if some supply is taken off the market, and there's some growth in demand, prices may go up. But I'm sure we're never going to see $100 anymore. I said a year ago, the price of oil above $100 is artificial. It's not correct.


http://www.usatoday.com/story/money/col ... /21484911/

[dan_s]

NEVER is a long time.

I do think it will be quite awhile before we see $100/bbl again, primarily because of the spike in the U.S. dollar. Take a look at this chart and you will see the reason for at least $20/bbl of the recent drop in oil price: http://www.marketwatch.com/investing/index/dxy/charts

[grimaldi]

Have you seen the scary GS forecast just posted on VF?

[setliff]

candlesticks say we have a bottom. they don't say how long it will be sustained. to really confirm we need to see the downtrend line broken and that will take some time bercause of the steep decent of the last leg down.