Saudi Arabia

[dan_s]

Many people are now speculating that Saudi Arabia has misjudged the U.S. shale producers. There is no doubt that today's low oil price is causing "pain" for Saudi Arabia (read article below). However, I believe this article misses the sharp decline in U.S. oil production that is just a few month away. U.S. oil production declined by more than 100,000 barrels per day in July and my forecast is that our oil production will be declining by over 200,000 barrels per day month-after-month in the 4th quarter. U.S. production will be approaching 8.5 million barrels per day by Christmas.

http://www.telegraph.co.uk/finance/oilp ... ckles.html

If you attended our luncheon in Houston yesterday, you heard our first speaker give convincing real-time data showing that well completions is Texas have dropped sharply over the last couple of months. The Texas Railroad Commission has confirmed a 13% drop in oil production since the first of this year. Well completions in North Dakota have also dropped like a rock.

If WTI remains under $50/bbl through year-end, we will see more reductions in capital expenditures and U.S. production will continue to fall. For this reason, I believe WTI will move toward $60/bbl eventually. However, it first needs to establish a base.