In a Skandinaviska Enskilda Banken AB (SEB) report sent to on Thursday, Ole R. Hvalbye, a commodities analyst at the company, said “speculation surrounding a potential surge in U.S. oil production – up three million barrels per day – has gained attention”.
Hvalbye warned in the report that such a ramp-up could drive crude prices below $50 per barrel but added that it “is considered unrealistic”. NN: Not only is it REALISTIC IT WILL HAPPEN
“U.S. producers understand the strategic risks involved, particularly with OPEC+ holding an estimated five to six million barrels of spare capacity,” the analyst said in the report. “A significant production increase by the U.S. would likely provoke a strong response from OPEC+, potentially flooding the market to protect market share,” he added. “Such a scenario would lead to sharp price declines, ultimately punishing U.S. production rather than fostering growth. This dynamic makes the proposed ramp-up highly unlikely,” he went on to state.
In a separate report sent to on Tuesday by Standard Chartered Bank Commodities Research Head Paul Horsnell, analysts at the bank, including Horsnell, highlighted that, on June 6, Scott Bessent, who was recently nominated Treasury Secretary by the Trump team, spoke at a conference at the Manhattan Institute. The analysts outlined that, following his nomination, Bessent’s session “was scrutinized as a potential guide to policy”. “During that talk, Bessent was asked which version of the late Shinzo Abe’s three arrows economic plan he would recommend to an incoming President Trump,” the analysts noted in the report. “Bessent (an admirer of Abe) put forward the
three targets of three percent economic growth, cutting the budget deficit by three percent of GDP by the end of the administration, and ‘three million more oil barrels equivalent a day from U.S. energy production’,” they added.
“Much of the commentary on Bessent’s nomination seized on the third arrow as implying a target to lift U.S. crude oil production by three million barrels per day, raising it 30 percent to about 16.5 million barrels per day by 2028. We think this interpretation is incorrect, with the key words in Bessent’s description of the arrow being ‘equivalent’ and ‘energy’,” they continued. The analysts went on to state in the report that the addition of three million per barrels of oil equivalent to U.S. energy production is a significantly less ambitious target, “even if we interpret energy production in this context as solely oil and gas”. “U.S. oil and gas output is currently about 40.7 million barrels of oil equivalent per day,” the analysts highlighted in the report. “It has grown by an average of about 123,000 barrels of oil equivalent per day per month since 2015; at that rate, three million barrels of oil equivalent per day would be added in less than 25 months,” they said. “Forty-one percent of the post-2015 increase has come from natural gas, 28 percent from natural gas liquids (NGLs), just 28 percent from crude oil, and three percent from other oil liquids (mainly corn ethanol),” they added. NN: I can in time make a case for $35 WTI Half where it is today.