Speaker Q&A

Ed Morse, Managing Director, Global Head of Commodity Research, Citi Group

What’s your outlook for US oil production (in bbl/day) over the next 5 years. What growth rate are you predicting?
 

US production growth will likely reflect average price levels.  We project that WTI prices will likely average around $55 a barrel for most of the period through 2025.  We recognize that prices are likely to be volatile, with WTI trading in a range of a soft floor of $40 and a soft ceiling of $70. We also look at total oil supply,  which provides both more accurate and I might say more startling numbers. On this basis, including black oil, bio fuels, natural gas liquids and refining processing gains, US total production ended 2018 at 18.5-million barrels a day, nearly 505 higher than both Russia and Saudi Arabia and in black oil alone the was the largest.  We expect on the basis of our price projection that US production total production should grow to 29.1-million barrels a day by 2025. 

How much of that will come from conventional oil and how much from shale? 
 

Some 8-million b/d should come from shale, while  deep water and natural gas liquids should be responsible for the remaining 2.6-m b/d.
 

How much will be for domestic consumption and how much will be exported? 
 

We expected that the recent gap between total US imports and exports of around 2.5-mllion b/d will be closed by 2020, so that some 8 million barrels a day should be in the export pool, making the US the largest liquids exporter in the world.
 

What are the major variables that might impact the above? 
 

There are three critical variables to consider. First is the price of oil. If WTI oil were to average $45 a barrel growth in production would be much lower; at a sustained $70 a barrel it would be much lower. If the OPEC+ countries wanted to reduce the role of US shale they could produce more and drive prices down, as they did in 2014.  Second is the state of US politics. A change in who governs could lead to a coalition of anti-oil and anti-shale people in the White House and Congress with restrictions imposed on gas flaring, pipeline buildout and a host of other regulations that could significantly curtail shale oil production growth. Third, and we think this is not likely, sceptics about shale could potentially be proved right – the phenomenon might not be viable, might be short-lived because of geology or technology.