When will Crude Oil prices go up?
Posted: Tue Aug 11, 2015 10:54 am
Art did a great job on the article he wrote for OilPrice.com. You all need to read it.
"....world demand reached a new high of 93.86 million bpd, an increase of 1.3 million bpd over May. Another month of demand growth and slowing production growth might go a long way towards turning prices around."
Read: http://finance.yahoo.com/news/oil-price ... 30155.html
" My colleague Euan Mearns recently did a forecast for U.S. tight oil plays and concluded that production from the Eagle Ford, Bakken and Permian would decline by about 830,000 bopd by the end of 2015." < My take is that since there is almost no drilling activity outside of the major shale plays, U.S. production is sure to fall by A LOT in the 4th quarter.
What It Means
The significance of these production forecasts and the second quarter earnings reports is that U.S. tight oil production will decline. The fact that production has remained strong despite a 60% decrease in the tight oil rig count has incorrectly lead some analysts to conclude that production will not fall because of the ingenuity and efficiency of U.S. producers.
It takes time for production to decline because there are months of lag between the beginning of drilling and first production, and more months of lag before production data is released. Also, many of the rigs that were released were drilling marginal locations that didn’t contribute much to overall production–the 80-20 rule. And, there is the inventory of uncompleted wells that are unaffected by rig count.
Will a decline of 400,000 to 800,000 bopd in U.S. tight oil production make a difference in the global market balance? Obviously, it depends on what other producers do but it is certainly important to OPEC’s strategy of gaining market share from unconventional producers.
OPEC is producing more than half of the world production surplus and has the capacity to cut production by the entire amount of the surplus. This will not happen until its goals are achieved but Saudi Foreign Minister al-Jubeir will meet with Russian Foreign Minister Sergei Lavrov August 11 in Moscow to discuss global energy markets and other topics. EIA will release its STEO on the same day and IEA will release its OMR the next day.
I am hopeful that something positive will emerge that will at least help to stop the decline in oil prices.
By Art Berman for Oilprice.com
"....world demand reached a new high of 93.86 million bpd, an increase of 1.3 million bpd over May. Another month of demand growth and slowing production growth might go a long way towards turning prices around."
Read: http://finance.yahoo.com/news/oil-price ... 30155.html
" My colleague Euan Mearns recently did a forecast for U.S. tight oil plays and concluded that production from the Eagle Ford, Bakken and Permian would decline by about 830,000 bopd by the end of 2015." < My take is that since there is almost no drilling activity outside of the major shale plays, U.S. production is sure to fall by A LOT in the 4th quarter.
What It Means
The significance of these production forecasts and the second quarter earnings reports is that U.S. tight oil production will decline. The fact that production has remained strong despite a 60% decrease in the tight oil rig count has incorrectly lead some analysts to conclude that production will not fall because of the ingenuity and efficiency of U.S. producers.
It takes time for production to decline because there are months of lag between the beginning of drilling and first production, and more months of lag before production data is released. Also, many of the rigs that were released were drilling marginal locations that didn’t contribute much to overall production–the 80-20 rule. And, there is the inventory of uncompleted wells that are unaffected by rig count.
Will a decline of 400,000 to 800,000 bopd in U.S. tight oil production make a difference in the global market balance? Obviously, it depends on what other producers do but it is certainly important to OPEC’s strategy of gaining market share from unconventional producers.
OPEC is producing more than half of the world production surplus and has the capacity to cut production by the entire amount of the surplus. This will not happen until its goals are achieved but Saudi Foreign Minister al-Jubeir will meet with Russian Foreign Minister Sergei Lavrov August 11 in Moscow to discuss global energy markets and other topics. EIA will release its STEO on the same day and IEA will release its OMR the next day.
I am hopeful that something positive will emerge that will at least help to stop the decline in oil prices.
By Art Berman for Oilprice.com