Goldman Sachs Energy Equity Research after US exploration and production companies' earnings season, sees oil market's tightness underestimated, as well as prospects for some of the larger US shale players.
"We believe greater investor confidence in a more rapid normalization of OECD inventories on a days' of demand basis can drive improved outlook for oil prices during 2018 and into 2019 (we have both above strip/consensus oil price forecasts in both years)."
The bank said that after earnings season and guidance from the E&P companies it follows, it has reduced its US oil forecasts for the first half and full year 2018 by 2.0 percent/2.1 percent overall for the producers it covers.
Although, "EIA data implies a steep pick-up in [U.S. shale production] February," and output growth for the US as a whole this year is 1.1mln bpd.
"Some [E&P companies] citing current backwardation in the oil curve as rationale for not allocating more capital to drilling. We believe the pickup in returning capital to shareholders indicates greater willingness to improve shareholder value vs. reinvesting in growth at all costs, though questions on whether it will be enough for these producers to get rewarded remain."
Bank highlighted EOG/OXY/RSPP for above consensus production growth.
Oxy's "Permian ramp-up remain underappreciated," especially for the second half of this year.
EOG's "production guidance is conservative (we are 2 percent above the upper end of company guidance and +5 percent vs. consensus expectations for FY18 total production)"
(First Oil reports are produced by MT Newswires' global team of oil reporters. This story is also disseminated in real time to energy industry professionals via the First Oil Chat service on the ICE Instant Message application.)
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