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Lower Oil Prices Fail To Stop U.S. Shale Growth

1. U.S. shale grows even with lower prices

- OPEC+’s task in Vienna was complicated by the fact that the projections for U.S. shale growth are all over the map.

- The latest projection from Rystad Energy finds that U.S. shale will grow “even in an environment with lower prices.”

- The Norwegian consultancy said that the oil market would see a substantial build in inventories in 2020 without deeper OPEC+ cuts.

- Rystad notes that despite the significant decline in the U.S. rig count, the pace of spudded wells has not fallen dramatically.

- Still, spending has fallen by 6 percent in 2019 and is expected to decline by another 11 percent in 2020.

- Rystad’s base case is U.S. light tight oil production grows to 11.6 mb/d by 2022, implying a CAGR of 10 percent each year between 2019 and 2022.

- But output comes to a standstill at 10.1 mb/d over that timeframe in a $45-per-barrel scenario, a mostly flat production trajectory.

2. Simple refineries not making money as IMO deadline approaches

- The IMO rules tightening up sulfur limits in marine fuels takes effect next month. Sudden changes in prices and differentials in refined product markets suggests that the refining industry is starting to make the switchover.

- Simple refiners that have limited ability to adapt could struggle. “A combination of rising compliance rates and run cuts from simple refiners could drive higher diesel…





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