Don’t bet against US Shale!

David Bamford

07 September 2018

….at least not for a while!

As the demand for oil and associated liquids creeps past 100mmbbl/day, whilst companies wishing to access Iranian crude are confronted with the reality of sanctions once again, and there’s a meltdown in Venezuela – semi-normal geopolitics in fact – a super smart bunch of folk is betting on the oil price continuing to rise, perhaps past $100/barrel.

Perhaps less well publicised than the Eurovision Song Contest and the ‘really sad’ failure of Arsenal FC to make next season’s Champion’s League was the fact that US oil production has motored smoothly past 10mmbbl/day and is probably going to break 12mmbbl/day in the second half of 2019, driven by the remorseless locomotive which is production from the Permian Basin of West Texas, together with a chunky contribution from the deep water GoM.

Quite how the supply/demand balance will play out over the next 18 months to two years remains to be seen but I wouldn’t be surprised to see the price back towards $60/barrel. IMHO of course…..though I’m not far away from the “Bloomberg Consensus” of $65/barrel mentioned in this article.

https://www.rigzone.com/news/analysts_we_see_prices_trading_into_the_8090_per_barrel_range-16-may-2018-154624-article/?utm_campaign=DAILY_2018_05_17&utm_source=GLOBAL_ENG&utm_medium=EM_NW_F2

But I am a long way from the article’s actual forecast of what happens beyond 2020.

Yes, in the medium-longer term there is a question as to how long the Permian Basin can keep going like this – an eye-watering number of producer wells are planned for the next 3 years; but then there is a “Where next?” question still to be answered.

But history tells that forecasting oil prices even a couple of years ahead is a foolish game…….