Redefining ‘Bullish’ in Today’s Oil & Gas Markets
5-year outlook report focuses on guidance from 69 producers, OPEC’s cut impacts and 2017’s ‘no show’ winter
Media Contact: Jon Haubert | 303.396.5996
Austin, TX (April 5, 2017) – In the latest installment of its market outlook series, the Fundamental Edge, Drillinginfo has released Redefining Bullish, a 57-page report including its new 5-year forecast for crude oil, natural gas, and natural gas liquids (NGLs).
On the supply side, Drillinginfo’s forecast for the rest of 2017 is based on guidance from 69 oil and gas producers and includes an OPEC production cut update, as well as the impact to the global supply/demand balance and what producers and investors alike can expect going forward. The report also analyzes the impacts on natural gas with this years ‘no show’ winter.
Key Findings from the Report:
- Current market fundamentals are more bearish for prices in relation to the market outlook released in November. For crude oil prices to average between $50-$52/Bblin 2017, OPEC must extend quotas through YE2017 and maintain reasonable compliance, demand must grow at least 1.34 MMBbl/d (as currently forecasted by the IEA), and Libya and other countries must keep production growth to a minimum. Only when these criteria are met can the high crude oil inventory levels be normalized to levels from prior to the price crash by the YE2017.
- Price recovery may be sustainable once the inventory levels are normalized. However, when OPEC ends the production cuts, this will inject a significant amount of supply back into the market putting pressure on prices, which will be unlikely to reach $60/Bbllevels in 2018.
- Natural gas production declined in 2016 for the first time in a decade, and is currently 2 Bcf/d below last year’s production. Producers need prices to rise above the current forward strip in order to increase drilling activity, revert declines, and meet increasing demand from power burn and exports (LNG and Mexico).
- As oil and gas prices recover, NGL prices will recover. Persistent oversupply and competition from other feed-stocks will prevent a return to NGL-crude linkage levels observed in the past; new expected structural demand can be met with our future forecasted price levels.
The next Fundamental Edge report will be released in late April and will focus on natural gas demand from the power sector this summer. Dry gas production and power burn are the most important factors impacting the natural gas market, and power burn has seen record highs over the past five-years due to coal-to-gas switching and hot weather. Our expectations for summer 2017 will be covered in this update.
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