The latest look at oil from ANZ, the bank is wary on expectations for quickly growing production:
Summary of comments, bolding mine:
- The recent jump in drilling activity in the US has raised concerns about the impact higher prices will have on US shale output. However, we believe a combination of a move by producers to focus on profitability, rising infrastructure constraints and crew shortages will mean the actual growth in production will be lower than drill-rig numbers suggest. We have adjusted our forecasts for US crude oil production to reflect this scenario, with output expected to grow by 900kb/d in 2018 to 10.8mb/d.
- Rising prices have already seen drilling activity pick up in the US. After remaining relatively unchanged for most of H2 2017 (between 670-680 according to EIA data), the rig count has risen sharply over the past couple of months to hit 704. We expect this trend to continue, particularly if WTI crude remains above USD60/bbl.
- However, there is a growing list of constraints that are likely to inhibit subsequent growth in US shale oil production. Investors are pressuring producers to focus on profitability and returns, which has led to completed wells falling behind in drilling activity. We are also hearing of shortages of crews in the US, with many producers struggling to attract people back into the industry after the job losses over the past couple of years. Infrastructure constraints, such as pipeline capacity, are also likely to constrain the growth in completed wells
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From the same report, ANZ also look at the expected impact of the new US tariffs on steel and aluminium ... in brief:
- We don't see the tariffs having a negative impact on steel prices
- However, it could provide some support for aluminium
- More importantly, it raises the risks of an all-out trade war, which could dampen economic growth and weigh on the sector
