Taal selectie

Oil

Shale is the name of the game

During the month of December, stock prices of shale oil producers traded broadly in line with the oil price: the WTI rose by 5.2% and our shale oil selection gained 7.7%.

CrudestocksSource : Bloomberg

With global demand estimated to grow by ca. 1.65 million barrels/day in 2018 (like in 2017) and a “pipeline” of only about 1.2 million barrels/day of new conventional oil due to hit the market (not sufficient to offset the natural depletion rate of existing conventional oil wells), the expected 1 million barrels/day ramp-up of US shale oil production will not be able to bridge the gap. Crude oil inventories will thus shrink further and a situation of shortage (inventories below their 5-year average) emerge in the second half of the year or maybe sooner – assuming OPEC and Russia continue to respect their 1.1 million barrels/day production cuts. An oil price of USD 80 per barrel is certainly not impossible in these circumstances and would lead stock prices of shale oil producers to skyrocket, especially the more leveraged ones and those active in the Bakken basin. On condition, however, that they have not already sold forward their 2018 production (or part of) in the USD 52-57 range, as is the case for many E&P companies. Our selection will be adapted accordingly.

(update : 01.2018)