US analysts warn about risks for oil producers

Oil&Gas Materials 9 September 2016 16:12 (UTC +04:00)

Baku, Azerbaijan, Sept. 9

By Aygun Badalova - Trend:

Oil producers must consider risks from shale supply when talking about the output freeze agreement in order to stabilize the market, analysts of the US JP Morgan bank said in the report, obtained by Trend.

“If OPEC members consider the threat from shale oil production as the greatest risk to markets at this juncture, then maintaining a strategy of defending market share would be appropriate as this will force high cost producers out of the market,” analysts said.

Evidence of this policy working comes from the decline in production from Vietnam, Colombia, China and other high cost regions, they said.

However, the second quarter results season for US shale producers again demonstrates that those companies with good assets, positioned at the bottom end of the cost curve can survive and in some cases thrive at current price levels, according to the analysts’ report.

US analysts retain the view that US crude supply will decline sequentially until the end of the year, to 8.4 million barrels per day before rebounding in 2017.

According to the latest forecasts of the US Energy Information Administration (EIA), US oil production to average 8.8 million barrels per day in 2016 and 8.5 million barrels per day in 2017.

The country’s crude oil production averaged 9.4 million barrels per day in 2015, according to the EIA’s estimates.

The informal OPEC meeting is expected in late September in Algeria. It is expected that the talks on oil production freeze will be held between OPEC and non-OPEC countries.

The meeting will be held at the fringe of the International Energy Forum in Algiers from 26-28 September.