Reuters is going to drive up oil prices today goddammit, even if they have to publish 18 stories to do it.
“Saudi Arabia wants crude oil prices to rise to around $60 a barrel this year,” Rania El Gamal and Alex Lawler wrote on Tuesday morning, citing “five sources from OPEC countries and the oil industry.” Apparently, $60 is “the level [Saudi Arabia] and its Gulf allies believe would encourage investment in new fields but not lead to a jump in U.S. shale output.”
Several hours after that ran, we got a frustrated
Well, we probably should have seen what was coming next when Resnick-Ault noted that “OPEC has so far surprised the market by showing record compliance with oil-output curbs, and could improve in coming months.”
Sure enough, exactly 30 minutes later, Reuters ran another piece by the aforementioned Rania El Gamal and Alex Lawler who this time around informed us that according to a Reuters survey, compliance with the production cuts has now reached 94%.
The third time, it turns out, is the charm and in case anyone needed a little more incentive, the White House denied rumors of an executive order on ethanol.
- WHITE HOUSE SPOKESWOMAN SAYS ‘NO ETHANOL EO IN THE WORKS’: RTRS
The end result:
- API data is at 4:30 and you know what that usually means (rising stockpiles and a knee-jerk algo fest, although last week broke the mold)
- this whole idea that $60/bbl is going to keep a lid on US shale production doesn’t quite jive with what analysts have said of late. On that score, I’m rerunning some commentary and a few charts from BofAML below
To estimate US shale production growth over the next five years, we conducted a price sensitivity analysis based on break-evens, drilling potential, annual decline rates and productivity gains.
We estimate that US shale production will decline annually by 270 thousand b/d, on average, until 2022 in a $40/bbl WTI environment. At $50/bbl, growth returns, though only at a small average of 240 thousand b/d. Should WTI trade at $60 for the next five years, growth reaches 700 thousand b/d, and at $70/bbl it reaches 950 thousand b/d (Chart 15).