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Analyst details global realignments that could impact Permian producers

 November 6, 2019 - 11:53 PM EST

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Analyst details global realignments that could impact Permian producers

Nov. 07-- Nov. 7--Ongoing geopolitical realignments are among the challenges expected to keep crude price volatility ongoing, says one analyst.

Tom Petrie, chairman of Petrie Partners, detailed those challenges for those attending the Hart Energy Executive Oil Conference at the Horseshoe on Wednesday.

"Amid those challenges is what happens in the US,' he said. Citing recent forecasts from the Energy Information Administration that US oil production will rise to 13.2 million barrels a day in 2020, he said the recent laydown of rigs may keep the country from achieving that level.

The bulk of crude produced in the US won't be consumed in the US, he pointed out, meaning US producers must continue to develop international markets as exports of US crude rise. Exports are headed to Europe, and he said Asian markets must be developed long-term.

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"I see a tenuous supply-demand balance," Petrie said. While Saudi Arabia and Russia each need oil prices at $75 to $80 or higher to be economic, he said the US is competitive at $65 or higher. But the viability of US shale producers and OPEC members is increasingly questionable with prices below $50 a barrel, he added.

Adding to the questions surrounding supply-demand balance are geopolitical realignments, such as the overlapping crude oil cooperative triangles of Russia-China-Iran, Russia-Iran-India and China-Iran-India.

"We did not characterize the industry in these factions from the end of World War II to 9/11, but they're in evidence and being cemented further," he said. "Strategists in Washington DC will need to take that into account."

From unrest in what he called three failed states in the aftermath of the 2011 'Arab Spring' to the continued Cold War state between Saudi Arabia and Iran and a possible future virtual merger between Iran and Iraq, "there are lots of reasons to expect continued challenges in the Middle East."

Petrie also factored in the imminent initial public offering from Saudi Aramco and the fact the sharp decline in exports of Saudi crude has been offset by exports of Saudi crude to China. With China looking to comply with US sanctions against Iran, Russia is also exporting crude to China, deepening economic ties between the two countries.

"There are real important changes occurring, and I wanted to put that into perspective for you and their impact on the Permian Basin," he said.

Source: INACTIVE-Tribune Regional
(November 6, 2019 - 11:53 PM EST)

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