HOUSTON – With oil production from the US, Saudi Arabia, Iraq, and to some degree Russia rising in the face of declining prices, and with output from Iran looming on the market, IHS Energy sees another drop in per barrel prices as possible.
IHS Energy’s Insight also said that US production will not just have to stop rising, but will have to decline to 9 MMb/d or less to even begin eroding the world supply. If US production does drop to 9 MMb/d, the report sees the oil drilling rig count dropping to about 600 by 4Q 2015 and further to 400-450 in 2016.
If those moves come to pass, IHS says oil prices could go to the low $40s or even $30s for a while. The prices would then rise only when the world supply and demand are closer to a balance.
With the US in the role of swing producer rather than OPEC, the historical market dynamics change. OPEC has no incentive to drop prices nor does Saudi Arabia have an incentive to make supply room for Iranian oil.
With US tight oil production volumes swinging more than other supply sources, those wells being drilled and completed faster, and showing high decline rates, lower investment will cause reduced activity and that will serve to bring total production down.
IHS paints gloomy picture for oil prices ahead