$70-$100 per Barrel for the Coming 5-10 Years
In its Oil Market Report sent to clients today, DNB Bank’s Oslo research team led by oil market analyst Torbjørn Kjus, said “we now believe prices have dropped to unsustainably low levels and our oil price forecast is now bullish vs the whole forward strip.”
In its analysis, DNB sees the 20%-30% CapEx spend cut that is ripping through the oil patch in 2015 continuing into 2016.
“We believe the CAPEX cuts will be even larger in 2015-16 than what we saw in 2008-09 and the effect on net decline rates could be quite meaningful.”
“The oil market is currently only focusing on bearish news and seems to ignore bullish data,” Kjus said in a research note emailed to clients with the report. “Lower prices are for example set to stimulate demand growth in the two largest consuming nations, China and the US. In fact we can already see it in the reported numbers.”
DNB cites Sanchez Energy’s (ticker: SN) well cost reduction to $5 million from $7.5 million, driven by oil service price reductions and increasing efficiencies. “That particular company is now guiding a CAPEX cut of 63% by the way, from $1.15 billion USD to $425 million USD. This CAPEX cut results in a drop in rigs from 7 to 3 and average production for 2015 is guided to be equal to the Q4-2014 production at 40-44 kbd. In other words, the company looks set to maintain output at approximately the current level even with the 63% cut in CAPEX. If this kind of behavior is representative for the broader shale industry, the oil supply-demand balance will fix itself during 2015 if shale production stops growing.”
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