[ad_1]
OPEC production cuts, Venezuelan chaos and sanctions that drive up oil prices this year – the United States. shale production is also slowing down.
And the result is a phenomenal 30% increase in WTI crude prices in the first quarter, with the US benchmark rising from $ 45 a barrel in early January to $ 60 at the end of March.
Improved supply fundamentals, including easing worries about global economic growth and oil demand, led to the best quarterly oil performance of the last decade.
But the main factor was slowing growth in the American shale zone in response to a 40% drop in prices in the fourth quarter of 2018, according to a report. of
John LaForge, Head of Real Estate Strategy at Wells Fargo Investment Institute.
While Saudi Arabia is the "alternative" producer, managing the market by deliberately holding back or increasing production, whatever the price, the United States is the world's marginal oil producer – the country will pump that that the industry calls the extra barrel of oil Prices are the key to determining world oil prices, says LaForge.
But growth in oil production in the United States is now slowing, as the average daily production of crude oil in the United States fell in January from the previous month for the first time in almost six months, according to the report of the United States. EIA published late March.
And it's in the margins that we should look for.
"Commodity prices are often set in the margin, which means that they are set by the producing country for that extra barrel of oil, ounce of gold or copper pound. In the case of oil, the United States produces this extra barrel of oil that the world can consume, "says LaForge. Related: shale is in a deep state of flux
"The rise in oil prices in 2019 is a direct response to the downside potential of US production growth," said the Wells Fargo Investment Institute, which aims for a goal of $ 65 a barrel year-end. 2019 for the WTI.
Referring to the price of balance at the world's marginal oil producer, LaForge said:
"The mid-40's is the moment when the average American shale producer begins to seriously question his future drilling plans – and that's precisely what happened in late 2018. "
Shale growers tend to agree with this point of view.
According to the first quarter report of the Dallas Fed Energy Survey, which included executives from 82 E & P companies, the average breakeven break-even prices for profitable drilling a new well range from 48 to $ 54 per barrel, depending on the region. Drillers need an average of $ 50 per barrel to profitably drill a new well, down $ 52 a barrel from the same question last year. Midland break-even average prices in the Permian were $ 48, the lowest cost in the United States and the lowest cost region of the last three years.
"With the recent recovery in oil prices, the majority of survey companies can profitably drill a new well at current prices. 78% of the answers were equal to or lower than the March 22 WTI cash price ($ 59 per barrel), "the survey showed. Related: Aramco's mega debt deal is a dazzling success
However, the first quarter increase from US $ 45 to US $ 60 has resulted in a significant increase in US oil production in the coming months, paving the way for increased supply in the global market. , LaForge of the Wells Fargo Investment Institute told me.
"The next short-term oil move could be down, probably in the $ 50 to $ 50 range. Later in the year, however, we expect WTI to reach $ 65, as geopolitical tensions heat up between oil-related countries, "he said.
Later this year, oil prices will be influenced by a combination of many factors, including the pace of growth in US production. The tightening of US sanctions on Venezuela, the next US decision on waiver of Iranian oil buyers, the next decision of OPEC production policy and geopolitical outbreaks such as those of Algeria and Libya influence the supply of the oil market. The global economy and trade problems will determine the resistance (or lack) of oil demand this year.
By Tsvetana Paraskova for Oilprice.com
More from Reading Oilprice.com:
[ad_2]
Source link