Rystad Energy expects oil price spikes for Brent in 2016

As a result of lack of growth in United states shale production and improved decline in mature areas, a Brent price as little as 50 USD/bbl is not lasting beyond 2016, shows current oil market research undertaken through Rystad Energy.

Around 10 thousand shale wells will need to be drilled each year to keep North American shale production toned. Assuming balanced cash moves, costs would need to be reduced by 20% in 2015 vs 2014 at a tariff of 50 USD/bbl to drill down those wells according to carried out well-by-well breakeven modelling.

Whilst 70 USD/bbl is likely excessive an average price for 2016, it is too low an average cost beyond 2017 as the extra effect of non-sanctioning of tasks reduces the global supply possible longer term.

“Our current market see is neutral to bearish in the short-term as we get a production floor at thirty USD/bbl. At such a low cost, the supply response in ALL OF US shale production coupled with currently visible drops in infill drilling in the Gulf of Mexico as well as North Sea will be therefore severe that the price are not able to remain that low with regard to long, ” says Nadia Martin, Senior Analyst in Rystad Energy.

Although the essential oil market is currently well-supplied and also oil stocks remain higher, Rystad Energy remains high in the longer term, with not far off price spikes for Brent already in 2016. The present futures curve is investing too low for marginal suppliers to hedge their upcoming production.

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