2018: Supply/Demand Trends Can Make Or Break Oil Prices

Robert Boslego - INO.com Contributor - Energies- Crude Oil Price


The crude oil price started the year off strong, as January posted the highest OPEC Reference Basket price ($66.85) since November 2014, the month in which the Saudis decided to wage an oil price war with American shale oil. But the market gave up its 2018 gain during the first week of January, as the Energy Information Administration (EIA) incorporated the huge November production surge into its short-term outlook and weekly time series data. To top it all off, Baker-Hughes reported the most significant one-week gain in its oil-directed drilling rig count.

Whether the market shifts back to bullish sentiment, or whether the bearish sentiment takes control this year, depends mainly on several key assumptions. The central hypothesis is how fast shale oil production will grow this year, and the second is what OPEC production will be, given the on-going risk to Venezuelan output. Based on U.S. production from August through November, the recent lagged response in drilling rigs, and the high prices experienced October through January; I expect that U.S. production will rise faster than either the DOE or OPEC assume in their forecasts.

EIA’s February Outlook

The EIA released its outlook, revising its U.S. crude production estimates much higher. For the year, it now expects crude production to average 10.59 million barrels per day (mmbd) in 2018, and to exit the year at 11.13 mmbd.

The EIA’s estimate of production for February is 10.260 mmbd. That figure is 1.07 mmbd higher than August. If anything, EIA’s 2018 prediction seems low. Continue reading "2018: Supply/Demand Trends Can Make Or Break Oil Prices"

As Argentina Backpedals, Will Oil and Gas Companies Step on the Gas?

The Energy Report: How is the news that Argentina holds the fourth-largest shale oil reserve in the world affecting business plans for companies that operate there?

Bill Newman: The U.S. Energy Information Administration (EIA) report that was released in June 2013 showed that Argentina has a technically recoverable shale oil resource of 27 billion barrels, so it reaffirms the large potential of Argentina. Although the shales plays are in an early stage of appraisal, we don't believe the potential of the shale is the key issue for oil and gas companies investing in Argentina. The political risk is still the chief concern. However, this year the government started to move away from its nationalist policies, so we think the political climate is slowly improving.

TER: When we talked last year, Argentina had recently expropriated the assets of Yacimientos Petrolferos Fiscales (YPF:NYSE) (YPF) from Spain's Repsol (REP:MC) without compensation. And the government temporarily froze the Argentinean assets of Chevron Corp. (CVX:NYSE) in response to a $19 billion ($19B) judgment in Ecuador. Has the danger of nationalization of foreign owned oil and gas assets receded or increased? Continue reading "As Argentina Backpedals, Will Oil and Gas Companies Step on the Gas?"

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