Energy Report: Shale From The Dead

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Maybe the U.S. shale industry is not dead after all. Even though OPEC says it no longer fears shale and shale companies have promised production restraint, the Energy Information Administration (EIA) surprised the market and raised their production forecast. That caused oil to reverse its turnaround Tuesday rally. Myra P. Saefong of MarketWatch wrote that the EIA expects domestic oil production to average 11.15 million barrels per day this year, up 1.2% from the previous view and it lifted its 2022 forecast by 4.3% to 12.02 million barrels per day. That increase seems to be higher than the trade was looking for and could be a result of producers that bought up on the Biden administration's crackdown on shale.

The  EIA not only raised their forecast for production but price as well. The EIA raised 2021 forecasts for the U.S. and global benchmark oil prices in a monthly report Tuesday, pointing out that the recent decision by major oil producers to extend existing supply cuts through April has provided support for prices in the near term. The EIA boosted its 2021 West Texas Intermediate crude price forecast to $57.24 a barrel, up 14% from the January forecast. It expects 2022 prices to average $54.75, up 6.2% from the previous forecast. For Brent crude, it also lifted this year's forecast by 14% to $60.67 and next year's by 6% to $58.51.

Oil did get some support from a report by the Organization for Economic Cooperation and Development (OECD) that said that the world economy is on track to be back to its pre-pandemic level by the middle of the year thanks to the $1.9 trillion fiscal stimulus package that will add 3 percentage points to U.S. growth this year. The project that global gross domestic product growth is now expected at 5.6% this year, more than 1 percentage point above the OECD’s December forecast, thanks to the COVID-19 vaccine rollout and the U.S. stimulus, it said. The world economy is seen expanding by 4% in 2022. The U.S. economy would expand by 6.5% this year, China by 7.8%, and the eurozone by 3.9%. France and Italy, with GDPs up 5.9% and 4.1% this year respectively, are the only major economies whose prospects were not upgraded by the OECD compared to its December forecast. They are also among the countries that have been slowest in rolling out proper vaccination campaigns, “Faster and more effective vaccination deployment across the world is critical” to keep the momentum of the ongoing recovery, the OECD warns, according to MarketWatch.

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