Morgan Stanley raises its oil price forecast, warns US shale may struggle to meet demand

[thackney]

Morgan Stanley raises its oil price forecast, warns US shale may struggle to meet demand
https://www.cnbc.com/2017/11/07/morgan-stanley-ups-oil-target-says-us-shale-struggles-to-meet-demand.html

Morgan Stanley has raised its forecast for oil prices through 2020, saying the world is hungry for more U.S. shale crude at a time when it's uncertain American drillers can deliver it.

The bank now sees international benchmark Brent crude fetching $62 a barrel in the final quarter of the year, up from an earlier estimate of $55. U.S. West Texas Intermediate crude is poised to average $56 for the quarter, up from Morgan Stanley's prior $48 call.

By the second quarter of 2018, Morgan Stanley forecasts Brent will average $63 and WTI will trade at $58 a barrel.

Demand for oil is growing at a surprisingly high rate, leading to a rapid drop in U.S. crude inventories, Morgan Stanley says. At the same time, OPEC and other oil exporters including Russia are likely to extend a deal to keep 1.8 million barrels off the market through next year.

Outside of OPEC, there is little growth in oil supplies, with the exception of the United States, where drillers can quickly tap shale wells, the bank notes. But even in the U.S. Lower 48, the number of rigs operating in oilfields has been falling....

[IsailedawayfromFR]

Supplies tightening not totally unexpected. 

- Lots of the frac crews who were there three years ago will not return to the work force readily.  Training new ones will take some time.

- My relative works at Nabors drilling where he told me a new generation rig has just been built that pulls a stand comprising of 4 joints of pipe and can operated by as little as two rig crew members.  These are destined for US oilfields.  Tough to imagine them being justified except for higher pricing

- Newest SPE journal I received prominently displays Permian information that infill well EURs are less than earlier well EURs - indicating aerial spacing may be too tight and less wells may be drilled.  More wells are also indicating more vertical connection between layers is occurring.  This means less horizontal layering will be targeted and, once again, less wells being drilled.

My gut tells me the Permian is overhyped and will not play out as productively as has been suggested in industry.