West Texas Intermediate (WTI) moved higher on Friday after Baker Hughes reported another drop in the active rig count. The number of rigs drilling for oil is now under 600 and I am expecting it to continue to drop through year-end. Many upstream companies have exhausted their drilling budgets for 2015. I follow over 100 upstream companies and most of them are cutting back on drilling new wells. Also, many of the wells being drilled are not being completed. U.S. oil production is on steady decline and there is nothing on the horizon that will change this.
U.S. Breakdown:
Rigs drilling for oil: Down 10 to 595 (compared to 1,590 a year ago)
Rigs drilling for gas: Up 3 to 192 (compared to 328 a year ago)
See more details at http://phx.corporate-ir.net/phoenix.zht ... portsother
Oil Prices - October 16
Oil Prices - October 16
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Prices - October 16
Oil set to balance, natgas may surge in Q4: B of A Analyst
Oil prices are set to head higher as global crude oil inventories appear poised to balance for the first time in eight quarters during the final months of 2015, Bank of America Merrill Lynch's Francisco Blanch said Thursday.
The market was oversupplied with 2 million barrels per day of oil throughout the first half of 2015, Blanch said in a recent note. But after a build of 540 million barrels during the last two years, the market is set to turn, he added.
"That's going to be a big event, which I think is going to support the price of oil into year end," he told CNBC's "Power Lunch."
Blanch now sees U.S. crude at roughly $50 a barrel and globally traded Brent at $55 by year end. U.S. crude has consolidated around $45 in recent weeks, and Brent has remained rangebound between about $47 and $49.
In a widely cited note issued last month, Goldman Sachs projected U.S. crude would end the year near $40 per barrel. It could potentially fall as low as $20 per barrel if production declines too gradually and crude surpluses surpass storage capacity.
Blanch said he believes it's highly unlikely oil will fall to $20 a barrel.
Merrill's chief global head of commodities research said in his note that global oil demand growth is increasing at the second-strongest pace in more than 10 years. At the same time, supply has crept lower as U.S. producers cut capital expenditures amid a protracted commodity price downturn.
The party may not last very long, though, Blanch told CNBC.
"We are very worried about the first half of next year, because we'll still see inventory builds in the next refinery maintenance season, but again, it's something we will worry about once we go past December," he said, referring to the seasonal periods when refineries shut down to service their facilities.
During those periods, crude inventories tend to build as refinery demand drops off. Blanch also sees natural gas surging about 40 percent to $3.50 per MMBtu into the end of the year as demand for the beaten-up commodity builds in the coming quarters.
That price increase will be driven by exports to Mexico, a big ramp up in industrial demand, and the construction of liquid natural gas plants in the American Southwest, he said.
Oil prices are set to head higher as global crude oil inventories appear poised to balance for the first time in eight quarters during the final months of 2015, Bank of America Merrill Lynch's Francisco Blanch said Thursday.
The market was oversupplied with 2 million barrels per day of oil throughout the first half of 2015, Blanch said in a recent note. But after a build of 540 million barrels during the last two years, the market is set to turn, he added.
"That's going to be a big event, which I think is going to support the price of oil into year end," he told CNBC's "Power Lunch."
Blanch now sees U.S. crude at roughly $50 a barrel and globally traded Brent at $55 by year end. U.S. crude has consolidated around $45 in recent weeks, and Brent has remained rangebound between about $47 and $49.
In a widely cited note issued last month, Goldman Sachs projected U.S. crude would end the year near $40 per barrel. It could potentially fall as low as $20 per barrel if production declines too gradually and crude surpluses surpass storage capacity.
Blanch said he believes it's highly unlikely oil will fall to $20 a barrel.
Merrill's chief global head of commodities research said in his note that global oil demand growth is increasing at the second-strongest pace in more than 10 years. At the same time, supply has crept lower as U.S. producers cut capital expenditures amid a protracted commodity price downturn.
The party may not last very long, though, Blanch told CNBC.
"We are very worried about the first half of next year, because we'll still see inventory builds in the next refinery maintenance season, but again, it's something we will worry about once we go past December," he said, referring to the seasonal periods when refineries shut down to service their facilities.
During those periods, crude inventories tend to build as refinery demand drops off. Blanch also sees natural gas surging about 40 percent to $3.50 per MMBtu into the end of the year as demand for the beaten-up commodity builds in the coming quarters.
That price increase will be driven by exports to Mexico, a big ramp up in industrial demand, and the construction of liquid natural gas plants in the American Southwest, he said.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group