RE: From our shale friends...14 Nov 2019 20:09
This came out of Abu Dhabi yesterday: "US producers are waiting to take their cues from OPEC, Francis Fannon, head of the US State Department's Bureau of Energy Resources, said at the conference. He joked that he did not envy the job that Barkindo has in chairing meetings of the producer group as it struggles with the rise of US shale supplies that have capped oil prices.
"US production responds to market conditions," he said. "When prices go up and down, US producers will modulate to meet demand."
The Energy Information Administration has forecast that US crude production will grow 900,000 b/d next year, and even OPEC's own projection sees a rise of 1.01 million b/d for 2020.
But Barkindo said US shale companies themselves had told him those forecasts were too optimistic. Many shale operators have outlined the financial pressures they are facing, in recent earning calls.
UAE energy minister Suhail al-Mazrouei also said at ADIPEC that he sees "a softening of what the US can produce," pointing to the increasing water cut of barrels pumped from shale formations.
Meanwhile, OPEC is forecasting "robust" global GDP growth of 3% for 2020, and oil demand growth of 1 million b/d "is reasonable," Barkindo said.
"The fundamentals of the global economy remain strong," he added. "A global contraction that will lead to a recession is not on the horizon. There is no cause for alarm at the moment."
There are contradictions even in that short passage. I think that Shale is maturing but the helter-skelter approach has built up debts. It is in everbody's interest, especially those on life support, to keep producing. The banks encourage it because they want their capital back and the shale companies have to go along. It'll be a different story once things settle down and the shalers are looking for fresh credit. The current situation is imo a mixture of DUCs and creditor pressure. Also don't forget we think Brent which is generally priced higher. Shale is here to stay but not as big a threat as once feared. The water needed is facing environmental pressures and a possible Democrat administration.
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