JP Morgan Slashes Its 2018 Oil Price Forecast By $11

JP Morgan slashed its 2018 WTI forecast by US$11—from US$53.50 to US$42. The price projection for Brent was also axed, by US$10, from US$55.50 to US$45.

The US shale-vs-OPEC-cuts tale has been the predominant theme in oil markets this year, and like the cartel's output cut, it will be rolling over into next year as well.

Major banks, the same that at the time of the initial OPEC deal were seeing the markets tightening and glut eliminated as soon as the second or third quarter this year, have started slashing their oil price forecasts for this year and next, as the 6-month OPEC deal failed to rebalance the markets and cuts were extended into March 2018. 

US shale production is expected to continue growing through this year and into next year. Meanwhile JP Morgan sees OPEC's extension deal as having no exit strategy, with the cartel not communicating what its end game is.

Source :

1) www.oilprice.com

U.S. shale firms more exposed to falling oil prices as hedges expire

Cash-strapped U.S. shale firms scaled back their hedging programs in the first quarter, leaving them more vulnerable to tumbling spot market prices just after OPEC reached a landmark deal to curb global supply.

The pullback in hedging was driven by rising service costs and expectations that prices would continue to rally after the Organization of the Petroleum Exporting Countries extended those cuts in May, analysts said.

However, rising U.S. production has stymied OPEC's efforts to rebalance markets. Crude oil futures LCOc1 have lost 15 percent of their value since February, raising the risk that unhedged companies are more exposed to market weakness.

More news, U.S. shale firms more exposed to falling oil prices as hedges expire


Source :
1) www.reuters.com

WTI Crude Oil - U.S. Shale's Favourite Financial Trick is Getting Less Attractive

Last weekend, Bloomberg reported U.S. drillers have dramatically reduced their hedging activity, a move that could portend a break in the production gains that
have upended global crude prices.

The relative cost of options protecting against a drop in West Texas Intermediate crude has fallen to its lowest since August, thanks to a big drop in producer hedging.
 
Hedging contracts lock in payments for future production. U.S. drillers signed onto such agreements in droves late last year, after an OPEC-led deal to cut output raised prices. The Catch-22 is that the guarantees gave drillers the security to boost output, undercutting the rally. Now, futures have languished to the point that the industry’s favorite financial safeguard no longer makes economic sense.

More news, U.S. Shale's Favorite Financial Trick Is Getting Less Attractive


Source :
1) www.bloomberg.com

WTI Crude Oil - OPEC's thorn in the flesh

 
A local paper published an article titled "OPEC's thorn in the flesh" in their weekly business section and caught my attention.

"A few key things have changes in the oil industry over the last few months.

One , US shale players are adapting to lower oil prices.

Two, technology is enabling shale players to extract so much more oil with less drilling - hence less capital expenditure.

Three, the efforts by the OPEC to cut supply is in fact helping the competition.

The conclusion is that oil rising above the US$55 level is going to be tough from now.

Here's the reality. US shale oil production has definitely rebounded, and this is one of the major reasons why oil prices are falling below the US$50 level.

This recovery in production has been boosted by falling production costs and efficiency gains within the US shale oil industry."

More news on Opec’s thorn in the flesh

Back in early 2016,  Bloomberg reported a news on their website latest information on US shale oil break-even cost.

"Texas has a message for $30 crude doomsayers. Bring it on."

" A handful of shale patches in the state, which would be the world's sixth-largest oil producer if it were a country, are profitable with crude below $30 a barrel, according to an analysis by Bloomberg Intelligence. In De-Witt Country, which produced more than 100,000 barrels a day in November from the Eagle Ford formation, the average well can be profitable with a U.S. benchmark crude at $22.52 a barrel, $4 below the lowest level this year."

Click below link for more detailed news :
Texas Isn't Scared of $30 Oil 


Source :
1) www.thestar.com.my 
2) www.bloomberg.com