Saudi Oversight | Russell T. Rudy Energy LLC
According to a recent article in “World Oil”, investment banking firm Goldman Sachs contends that Saudi Arabia is wrong to assume that U. S. shale producers will not respond to higher prices with increased output in 2017. Admittedly, crude oil prices are already increasing as a result of the agreement between OPEC and non-OPEC countries to cut back production for the first time in 15 years.
Initially, crude prices could rise to $60, but increased domestic shale production could force them back to $55. However, Goldman analysts note that the U. S. horizontal oil rig count is already responding and output should increase by the first quarter of next year. In fact, they anticipate domestic shale production could easily go up 800,000 barrels of oil per day (bopd) next year with an oil price of $55, the bank’s forecast for the first half of 2017.
In fact, according to the Baker Hughes, who publishes the weekly rig count, the number of drilling rigs looking for oil jumped by 21 to 498 last week, the most since January. Goldman concludes that the U. S. supply response, and the resumption of OPEC and Russian production growth once global crude inventories are reduced, will cap medium term oil prices. The company notes that the goal of the production cutbacks was never to raise prices, but rather curb inventories.
However, the Goldman analysts concede that “Greater than expected compliance to the announced cuts, or Saudi’s willingness to cut production further are two upside risks to our forecast.”
To read the article in its entirety, please go to http://www.worldoil.com/news/2016/12/12/saudis-wrong-to-rule-out-us-shale-oil-rebound-goldman-says .
Russell T. Rudy Energy, LLC buys oil, gas and mineral interests nationwide. Please call (800-880-0940), or write (info@rudyenergy.com ) to let us know if you agree, disagree or would just like to comment on this, or any of our posts.
