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Harold Hamm: U.S. Shale Spending Binge Could Destroy Oil Market

collected by :Jack Alex

In a rather unconventional warning, Continental Resources chief executive Harold Hamm said on Wednesday that should the U.S. oil industry embark on another spending spree, it could “kill” the market.
Continental Resources sees full-year 2017 output at between 220,000 boepd and 230,000 boepd, versus around 217,000 boepd for 2016.
Hamm’s Continental Resources will be investing US$1.95 billion, aiming to accelerate production growth in the second half of 2017.
Speaking at the CERAWeek conference in Houston – one of the largest gatherings of oil executives and ministers, including this year Saudi Arabia’s oil minister Khalid Al-Falih – Hamm said that U.S. crude oil output “could go pretty high”.
Many U.S. companies have announced higher spending plans for this year, having seen prices stable above US$50.

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U.S. Oil Production Is Surging… And That’s Okay

This year, that will narrow by 5 million barrels per day, followed by a widening to 8 million barrels per day in 2018.
When you look at the big picture, if nothing significant changes, the situation looks better than now a month ago, despite rising US oil production.
A look at the USLast year, oil production fell a nice clip compared to the year before, driven by a drop in oil prices in 2014 that worsened in 2015 and held firm through a sizable portion of 2016.
Since then, however, output has risen and recently topped 9 million barrels per day and is at, as of the time of this writing, 9.088 million barrels per day.
At one point, if you use the EIA’s weekly numbers, production fell to as little as 8.428 million barrels per day, while using their monthly estimates, the number dropped to around 8.567 million barrels per day.

U.S. Oil Production Is Surging... And That's Okay*/

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U.S. Shale Kills Off The Oil Price Rally

U.S. Shale Kills Off The Oil Price Rally*/

“Since the start of 2017 the average U.S. crude oil production growth has been +35 kb/d w/w.
The U.S. shale oil production response is too fast and too flexible.” If OPEC feels that cutting back is futile, they could pass on a six-month extension.
The pace of adjustment in the physical market for crude oil is starting to drag on, and investors are getting anxious.
With so many investors having staked out bullish bets, oil prices are exposed to sharp and sudden corrections if they unwind those positions.
Schieldrop went on to sum up the predicament for OPEC: “[W]hat will OPEC do in the face of strongly rising US crude oil production?

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