Analysts: Industry Rebound for WTI to Take Shape As $65 Oil in 2018
Oil and gas industry conditions stand to gain strength after 2017, in a confluence of growing demand and a collapse in no-shale capacity, according to an end-of-quarter report from Morningstar in Chicago.
“We are increasingly bullish on oil prices rallying in the medium term, and have raised our WTI forecast to $65/bbl for 2018, which is the level we believe is required to drive a large-scale recovery in U.S. shale activity,” wrote analyst Joe Gemino. “Even so, the strength of U.S. shale is lurking beneath the surface: Our analysis shows that the recent uptick in rigs and falling shale decline rates together are enough to stabilize U.S. crude production within six months.”
Gemino also said that if U.S. activity doesn’t scale back, production will begin to grow again in 2017. That highlights the strength of tight oil in the country, he said, which would limit a commodity price rebound.
“Should a price rally ensue, it is far too strong to not overheat and eventually snuff out any future oil price rally. We remain bearish on oil prices for the longer term, and we reiterate our mid-cycle oil price outlook of $55 WTI ($60 Brent),” he said.
But keeping the above in mind, Gemino said, there is more evidence that shale producers can survive – perhaps even thrive – at lower prices than assumed in earlier forecasts.
Through labor cost-cutting and efficiency advances in technology, shale producers have managed to reduce production costs, which makes drilling profitable even at lower commodity prices. In February, some producers made headlines suggesting that “$40 is the new $70” per-barrel price needed to drill, but that has yet to fully manifest.
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- The Rigzone Interview: Private Equity Cash Focuses on Oil, Gas Development
- Could Argentinian Politics Beat the Vaca Muerta?
- The Rigzone Interview: Oil, Gas Goes Digital for Safety, Speed
- Deal Of The Month: EQT, Rice Energy Merge in Mega Marcellus $6.7B Gas Deal
- OpEd: OPEC Production Cuts Fail, Markets Pay for Underestimating US Shale
- How Likely Is an All-Out War in the Middle East Involving the USA?
- Rooftop Solar Now 4th Largest Source of Electricity in Australia
- US Confirms Reimposition of Oil Sanctions against Venezuela
- EU, Industry Players Ink Charter to Meet Solar Energy Targets
- Analyst Says USA Influence on Middle East Seems to be Fading
- Russian Ships to Remain Banned from US Ports
- Brazil Court Reinstates Petrobras Chair to Divided Board
- EIB Lends $425.7 Million for Thuringia's Grid Upgrades
- Var Energi Confirms Oil Discovery in Ringhorne
- Seatrium, Shell Strengthen Floating Production Systems Collaboration
- An Already Bad Situation in the Red Sea Just Got Worse
- What's Next for Oil? Analysts Weigh In After Iran's Attack
- USA Regional Banks Dramatically Step Up Loans to Oil and Gas
- EIA Raises WTI Oil Price Forecasts
- How Likely Is an All-Out War in the Middle East Involving the USA?
- Venezuela Authorities Arrest Two Senior Energy Officials
- Namibia Expects FID on Potential Major Oil Discovery by Yearend
- Oil Markets Were Already Positioned for Iran Attack
- Is The Iran Nuclear Deal Revival Project Dead?
- Petrobras Chairman Suspended
- Oil and Gas Executives Predict WTI Oil Price
- An Already Bad Situation in the Red Sea Just Got Worse
- New China Climate Chief Says Fossil Fuels Must Keep a Role
- Oil and Gas Execs Reveal Where They See Henry Hub Price Heading
- Equinor Makes Discovery in North Sea
- Macquarie Strategists Warn of Large Oil Price Correction
- DOI Announces Proposal for Second GOM Offshore Wind Auction
- Standard Chartered Reiterates $94 Brent Call
- Chevron, Hess Confident Embattled Merger Will Close Mid-2024
- Analysts Flag 'Remarkable Feature' of 2024 Oil Price Rally