Shale Oil Exec Think Oil Prices Are Near Bottom
November 6th, 2019
The inventory report put out by the API said that crude stocks were up 4.3 million barrels and the outlook for today’s DOE inventory report is for crude to be up 1.5 million barrels. Crude oil stocks at Cushing, Ok were called up 1.3 million barrels.
Gasoline stocks were reported down 4.2 million barrels and that compares with the Reuters estimates for today’s DOE report to show gasoline stocks down 1.8 million barrels.
Distillate stocks were reported to be down 1.6 million barrels from the API and the estimates for today are for distillate stocks to be down 949,000 decline.
OPEC Secretary General, Mohammad Barkindo, said the oil market outlook for 2020 may be brighter than previously forecast, appearing to downplay any need for deeper production cuts. He said countries are increasing their compliance with the global oil deal. Earlier on Tuesday, OPEC released its 2019 World Oil Outlook, in which OPEC said it would supply a diminishing amount of oil in the next five year as output of US shale and other rival sources expanded. It stated that OPEC production of crude and other liquids is expected to fall to 32.8 million bpd by 2024. This is compared with 35 million bpd in 2019. OPEC expects supply of US shale oil to reach 16.9 million bpd in 2024 from 12 million in 2019, although the expansion will slow and peak at 17.4 million bpd in 2029. OPEC sees oil consumption in 2023 reaching 103.9 million bpd, down from 104.5 million bpd in last year’s report.
Pioneer Natural Resources, Chief Executive, Scott Sheffield, said that he expects the Permian Basis to “slow down significantly over the next several years.” He said OPEC does not have to worry that much more about US shale output growth longer term. He also stated that he is more optimistic that oil prices are near the bottom end of the cycle.
UBS expects oil prices to weaken in the first half of 2020 on strong supply growth in non-OPEC states amid weak global demand growth, with Brent prices testing $55 per barrel by mid-2020. Oil prices are expected to recover in the second half of 2020 on improving oil demand growth, ongoing strong OPEC and non-OPEC compliance with the production cut deal and the prospect of muted non-OPEC supply growth outside the US in 2021. It expects a recovery in the second half of 2020 with prices reaching $60 per barrel at the end of 2020. It sees oil demand increasing by 900,000 bpd next year. UBS also stated the US oil supply is expected to slow from 1.4 million bpd this year to 1.2 million bpd next year.
The Institute for Supply Management index on US non-manufacturing activity for October was released yesterday. This is a gauge of the service sector of the economy. The reported number was 54.7 up from 52.6 in September and better than the expectation of 53.4. This better than expected number was good news and it helped to support investor’s outlook and with that the equities markets.