The the EIA is projecting that global oil production will reverse recent declines and grow once again in 2016. But that’s because the agency is forecasting higher oil prices. EIA forecasts that Brent crude will average $56/bbl in 2016, and that WTI prices will average $51/bbl — about 70% higher than current prices. Note that if the EIA is wrong and production doesn’t begin to rise (which I think will be the case for at least the next six months), then global inventories should start to come down in Q2, eliminating one of the major downside risk factors for oil prices.
This is why Goldman Sachs, Raymond James, etc. are expecting the oil price to increase within six months.
Read: http://www.investingdaily.com/24469/on- ... ,mid.69070#
Oil Price Forecast - EIA
Oil Price Forecast - EIA
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
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bearcatbob
Re: Oil Price Forecast - EIA
"The the EIA is projecting that global oil production will reverse recent declines and grow once again in 2016. But that’s because the agency is forecasting higher oil prices"
How much of production capacity in 2016 is price dependent. It would seem to me that for production to hit the market this year in significant volumes either the projects are long term and just now coming on line or will be the result budgets already approved. What is the lag time between drill bits turning and say a $5 price increase?
How much of production capacity in 2016 is price dependent. It would seem to me that for production to hit the market this year in significant volumes either the projects are long term and just now coming on line or will be the result budgets already approved. What is the lag time between drill bits turning and say a $5 price increase?
Re: Oil Price Forecast - EIA
U.S. onshore production is on steady decline (over 100,000 barrels per day month after month), but there are a few Gulf of Mexico production platforms that will come on-line in 2016 that will increase production in the Gulf. Total U.S. production will decline 800,000 to 1,200,000 barrels per day depending on when and by how much oil prices increase.
If oil bounces back to approximately $60/bbl by mid-year most analysts believe we will see a lot of DUC wells completed. IMO that will only happen if the operators can lock in decent oil prices with hedges. The lead time to complete DUC wells is short (30-60 days) because the operators will just have to find frac crews and equipment. Logistics to get all the water and sand does take some time.
Once companies set their drilling programs for the year, they do not change them unless there is a significant change in commodity prices. Their boards will have to approve a budget increase, then the companies need to line up the rigs, crews and drilling fluids. That takes months.
Once offshore programs are set for the year they rarely change. If oil bounced back to $70/bbl tomorrow, I doubt we'd see much change in the number of wells drilled.
Outside of North America lead times are much longer.
If oil bounces back to approximately $60/bbl by mid-year most analysts believe we will see a lot of DUC wells completed. IMO that will only happen if the operators can lock in decent oil prices with hedges. The lead time to complete DUC wells is short (30-60 days) because the operators will just have to find frac crews and equipment. Logistics to get all the water and sand does take some time.
Once companies set their drilling programs for the year, they do not change them unless there is a significant change in commodity prices. Their boards will have to approve a budget increase, then the companies need to line up the rigs, crews and drilling fluids. That takes months.
Once offshore programs are set for the year they rarely change. If oil bounced back to $70/bbl tomorrow, I doubt we'd see much change in the number of wells drilled.
Outside of North America lead times are much longer.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group