What Do the Latest Developments Mean for OPEC and Oil? – Latest Developments OPEC Crude Oil
This all sounds very positive for oil and energy stocks, but there are signs that if OPEC increases production, it could depress the price of crude.
It has been rumoured that OPEC and Russia are currently considering putting somewhere between 800,000 to one million barrels daily of oil supply back on to the market. The sharp deterioration in Venezuela’s oil output, and the curtailing of Iran’s plans to significantly grow production after the U.S. pulled out of the controversial nuclear deal have created an opportune time for OPEC to boost production and claim further market share.
It would be quite easy for OPEC to expand production by this amount, because it has been estimated by the U.S. Energy Information Administration that OPEC has almost two million barrels a day of spare capacity. When coupled with recent considerable U.S. production gains and the substantial spare capacity that exists in the Permian Basin, this could cause oil to soften.
For March 2018, U.S. oil production shot up to a record all-time high of 10.47 million barrels daily, and there are signs it will keep growing at a rapid clip.
You see, the volume of drilled but uncompleted wells grew to a record high of 7,677 with the majority located in Permian Basin. The U.S. rig count climbed to 1,060 rigs its highest number since March 2015. It is forecast that the tempo of activity, particularly in shale oil basins, will continue expanding at a solid rate, because West Texas Intermediate (WTI) is trading at well over US$60, which is significantly greater than the estimated breakeven price for the majority of shale oil drillers of US$50 per barrel or less.
Even if OPEC boosts production, it is unlikely that oil will fall as sharply as some analysts have predicted. Firmer demand growth sparked by an improving global economy will underpin prices and prevent oil from plummeting to the lows witnessed in 2016.
Many oil companies, including Baytex Energy Corp. (TSX:BTE)(NYSE:BTE) and Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG), have reduced costs to the point where they have a breakeven WTI price of US$40 a barrel. That means even if crude slumps to US$60 a barrel, which is plausible in the current environment, they will continue to generate free cash flow and be able to invest in their operations.
What is becoming increasingly clear is that regardless of current developments, oil will, over the long term, rise in value, driving the shares of upstream oil producers higher. While Baytex has gained an impressive 45% since the start of 2018, Crescent Point has substantially lagged behind, only gaining 1%, and that — along with its high-quality assets and solid balance sheet — makes it an attractively valued opportunity for those investors betting on higher oil.
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-Oil steady as extra U.S. supply balances strong demand – Oil prices steadied on Monday as U.S. production hit a record-high and OPEC members considered boosting supply to balance rising global demand – Crude Oil steady USA supply demand
–Bearish forecast for oil on rising US output, Opec plans – A rise in US shale production and plans by the Organisation of Petroleum Exporting Countries (Opec) to gradually ramp up production are both expected to have a bearish impact on oil prices – Bearish forecast crude oil USA output Opec
-Oil prices won’t keep plunging because US drillers can’t meet demand, analysts say – Supply and demand in the oil market are finely balanced, and surging U.S. output might not be enough to offset supply disruptions in Venezuela and Iran – Crude Oil prices USA drillers
-IMF urges Saudi Arabia to resist temptation to spend, as oil prices rise – Saudi Arabia has been advised by the International Monetary Fund (IMF) not to increase spending, as oil prices reach $80 a barrel and are predicted to go higher – IMF Saudi Arabia crude oil prices
-Low oil price era is ‘dead’ as crisis-stricken Venezuela risks a supply shock, analyst says – The “lower for longer” oil price mantra is doomed, one oil analyst told CNBC Tuesday, amid heightened energy market fears of an imminent supply shock – Crude oil price crisis Venezuela supply shock
-Oil prices to peak in mid-2019: BofAML – Brent crude oil prices are expected to trend gradually higher, hitting an average of $80 per barrel (/bbl) by mid-2019 before gradually trending lower to an average of $71/bbl by end-2019 – Crude Oil prices peak 2019 BofAML
-What is the perfect price for oil? – When it’s too high, consumers start freaking out and using less. When it’s too low, oil companies cut back operations and lay off thousands of workers – Perfect price crude oil
-The Regulations That Could Push Oil Up To $90 – International regulations on the fuels used in shipping could tighten the oil market and push prices up to $90 per barrel in the next two years – Regulations Push Crude Oil $90
-Morgan Stanley Sees Oil Climbing To $90 By 2020 – Forget Iran and OPEC. There’s another issue that will keep oil prices supported for the next two years, according to Morgan Stanley’s oil outlook – Morgan Stanley Crude Oil $90 2020
-Get ready for $100 a barrel oil and the conflict it represents – The geopolitical risk premium in oil has driven crude prices to nearly four-year highs and shows no signs of abating – $100 barrel crude oil
-Oil for $300. Is It Possible? – If major oil companies keep postponing the necessary investments, the next “huge supply shock” may bring the oil price up to $300 per barrel – Crude Oil $300 per barrel possible
-Oil eases as clock ticks down to Trump decision on Iran – Oil eased on Tuesday ahead of an announcement by U.S. President Donald Trump later in the day on whether the United States will reimpose sanctions on Iran, but the price held within sight of its highest in more than three years – Crude Oil Trump Iran
-BP says still sees oil at $50-$60/bbl in 2018 as shale output surges – BP expects benchmark oil prices to weaken in the second half of the year as U.S. shale production surges by up to 1.5 million barrels per day – BP crude oil $50 $60 barrel 2018 shale output
-Who’s to blame for costly oil? Saudis, Russia and Trump himself – Rising oil prices are now the latest target in President Donald Trump’s cross-hairs. The nation’s tweeter-in-chief complained Friday about OPEC fueling – Blame costly oil Saudis Russia Trump
-Oil pulls back from gains; OPEC says glut nearly gone – Oil prices on Thursday hit highs not seen since 2014, built on the ongoing drawdowns in global supply and as Saudi Arabia looks to push prices higher, though U.S. crude gave back gains in the afternoon to finish lower – Crude Oil OPEC glut Saudi Arabia
-Escalating Middle East Tension Could Trigger Oil Prices To Hit $100 Per Barrel – Oil prices could soon soar to $100 per barrel amid growing fear about conflict in the Middle East, according to an oil analyst for CNBC – Oil Prices $100 Barrel
– IEA: OPEC Mission Near Completion as Oil Glut Vanishes – OPEC is on the verge of “mission accomplished” in its quest to clear the global oil glut that caused the worst industry downturn in a generation – IEA OPEC Crude Oil Glut
-Is Russia Cheating On The OPEC Deal? – After three months of steady output, Russia’s crude oil production increased in March to 10.97 million bpd, the highest level since April 2017, as the top two Russian companies boosted their production – Russia Cheating OPEC Deal
-Oil price crosses $70 amid Iran deal tensions – Oil prices rose as investors saw increasing possibility that the US could withdraw from the historic Iran nuclear deal – Crude Oil price dollars 70 Iran tensions
-Is $70 oil the new normal? – The global economy is poised to cope well even if oil prices will remain at around $70 per barrel throughout 2018, energy experts said – Dollars 70 barrel crude oil shale oil