Thought Piece

There are two factors that this Financial Tribune pieces does not mention, both of which clearly favor US shale. One, the impetuous to build new pipelines such as the Keystone Pipeline, Dakota Access Pipeline and several pipelines alone the upper east coast, all of which are expected to reduce transportation $5 to $7 dollar barrel; And second, the US is sitting on many, many DUC, drilled but uncompleted, wells which will take much less time and will be much less expensive to make them productive. Steve

 Analysts Weigh OPEC Price Boost Against Shale Rebound

Financial Tribune, Wednesday, February 01, 2017

Brent crude futures will average $58.01 a barrel in 2017 according to a Reuter’s poll, which is slightly higher than the $57.43 forecast in the previous survey.

It is the second consecutive monthly poll in which analysts have raised their price outlook for both Brent and US crude average prices in 2017, Reuters reported.

Brent has averaged about $55.45 so far this year and analysts believe US President Donald Trump’s administration could bring in new legislation to support the oil and gas industry.

“The Trump presidency could benefit the oil sector. It is not clear which measures will be implemented, but lower taxation and lower concerns about tighter environmental constraints would benefit US domestic production,” said Intesa SanPaolo analyst Daniela Corsini.

There is a risk Trump’s proposed policies may lead to an even greater rise in US oil production, which has been growing more quickly than many expected in the last year, according to several analysts.

“US shale oil production could surprise to the upside this year,” Commerzbank analyst Carsten Fritsch said. US crude oil output has risen by about 6.3% since the middle of last year to 8.96 million barrels per day.

US energy companies last week added oil rigs for a 12th week in the last 13, extending an eight-month recovery that is tapping into OPEC’s commitment to curb production that has kept crude prices above $50 a barrel since early December.

“At the end of the day, US shale oil drilling will depend on the prevailing market prices and there’s not much Trump can do about that,” said Capital Economics analyst Thomas Pugh.

One of the keys for the balance between supply and demand of oil this year is adherence by OPEC and a number of other exporters to an agreement to cut output. Analysts say the market should rebalance by the middle of this year, but it would take an extension of the OPEC output cut beyond the originally planned six months to maintain stability.