Raymond James Energy Stat of the Week
by J. Marshall Adkins
Energy Stat: Will Our Above-Consensus Permian Oil Growth Forecast Cause Differentials to Blow Out?
May 22, 2017
While energy investor eyes remain fixated on the OPEC meeting this week (May 25th), we're focusing this week's ''Stat'' on the oil market's next biggest concern, which is the fear of runaway U.S. oil production and its impact on price.
The ''surge'' in U.S. oil production growth is centered mainly in the Permian and has many energy pundits convinced that oil prices are range-bound (at best). While we are in complete agreement that U.S. and Permian oil supplies will surge over the next eighteen months, we've pointedly disagreed with the conclusion that oil prices will remain flat or down over the next year. In fact, we have one of the most (if not the most) aggressive 2017/18 Permian production growth forecasts on the street but we don't think it will be sufficient to oversupply the oil market in the near future. In today's Stat, we'll take a dive into the largest driver of U.S. oil supply growth - the prolific Permian Basin - to discuss: (1) the outlook for oil production (hint: it's fast), (2) the ability of Permian pipe infrastructure to keep pace with production growth, and (3) what our updated Permian forecasts mean for Permian price differentials (both timing and magnitude).
This is a summary of a much more detailed commentary. Please contact your financial advisor for the full report.
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