Short-term oversupply in the oil market sent prices down 75 percent and led to crisis in much of oil and oil service industry. Karl Oscar Power in Pareto Securities states that this has taken attention away from robust demand growth, and the structure of the supply side is about to be changed permanently.
“The world goes from a situation in which OPEC has been the swing producer who could balance the market that this role is about to be transferred to companies that extract US shale oil. The shift from “ call on OPEC ” to “ call on shale ” has a predictable consequence: Higher oil prices are necessary to balance the market, “writes Power.
Pareto analyst Trond Omdal said in an interview with the current one has seen that overall costs have come down by 30-40 per cent, which means that many oil companies previously needed over $ 100 a barrel to have positive cash flow during 2017 will be reduced to 55-60 dollars a barrel. But in addition to efficiency and lower supplier margins, this has also come through deferment of projects of nearly $ 400 billion over the last two years.
– When the world once again need growth in US oil production and other non-OPEC production, it must also be invested in higher cost shale oil, oil sands and offshore projects. Since so much capacity taken out in many supplier segments we expect the cyclical inflation also will come back. We therefore believe USD 70-80 / barrel is the “new” US $ 100 / bbl, and not USD 50-60 / barrel forward market indicates. But much depends on what happens with the poltiske developments and investments within OPEC, particularly Iran and Iraq. If not investing sufficient resources also within OPEC area we can again see oil prices above USD 100 / barrel by 2020, said Omdal.
Pareto expecting an oil price of $ 50 in the third quarter and $ 55 in the fourth, rising to $ 60 in 2017 and 70 dollars from 2018.
Read the full article at paretosec.no
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