Wood Mac's Forecast | Russell T. Rudy Energy LLC
“Rigzone” reports that consulting group, Wood Mackenzie, sees the Permian Basin of West Texas and Southeast New Mexico as the marquee shale play of the future. As such, the area will have to assume a pivotal role in restoring shale oil production growth in the U. S. At first blush, one could ask “with a global oil glut why do we want production growth?”
In answer, Wood Mackenzie points out that as conventional oil production continues to decline in the U. S., we need increased shale production just to stay even. True, there is currently a global oversupply of oil, but they contend that long term, 5 to 7 million barrels of oil per day (MMbopd) of production growth will be needed to balance out the global market in the long term. That is a great deal of oil. However, they estimate that a price of $70 per barrel would enable Lower 48 domestic operators to produce 7.5 MMbopd by the end of 2018.
Ann Louise Hittle, vice president of macro oils at Wood Mackenzie, predicts that global oil demand between 2015 and 2025 will grow from 94 to 103 MMbopd. However, upstream spending, which has been drastically curtailed due to low prices, will make it difficult to accommodate even modest demand growth.
In 2015 oil supply grew by 3.2 MMbopd, which triggered the price collapse. OPEC countries responded by producing more to make up in volume what they had lost in price. This in turn led to inventories building to the point that we have a global glut. Hittle observes that global supply now alternates between slight builds and draws and projects a slight draw for September. By year-end she foresees demand exceeding supply, which could result in a further decrease in inventories on a sustained basis.
Hittle observed, “This is one reason why Wood Mackenzie contends that prices have an underlying floor to them and will be supported as the market enters the fourth quarter, regardless of an OPEC production freeze.”
Despite their economic slowdown, Chinese oil demand is still growing due to an increasing middle class which is buying cars and consuming more gasoline. Also, demand for oil derivative consumer products and jet fuel is on the rise there.
To read the article in its entirety, please go to http://www.rigzone.com/news/article.asp?hpf=1&a_id=146544&utm .
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.
