Martin King of GMP Research onside (below). With OPEC cuts and the world already in a supply deficit as early as last July what happens when the shuffling of inventory barrels to North America ends and the true nature of the supply shortfall comes to pass? $100+ WTI & Brent?
There could be massive value creation in the holdings of certain oil reserves that the market & most if not all market participants blow off as worthless in the forever glut paradigm. Think oilsands especially. What is Athabasca, Baytex (Cda for free now), POE SAGD project worth at $100+ oil, GXE heavy and (any others with 10 bagger potential in such a scenario)?? What will happen to Canadian service co's in a market that realizes North American shale, tight oil is the only feasible short term response mechanism in a world that looks to be short supply for the next 3 years?
"Putting aside various reasons why we think U.S. supply growth
may not be as optimistic as some think, such growth in the U.S.
(and Canada) still pales in comparison to the supply losses that
are happening in the rest of the world. If we extract out the
U.S. and Canada from monthly Non-OPEC supply data, the
losses have been significant over the past six months, seeing
year-over-year supply losses in the range of 2.0 million bbl/d
. Allowing for what is going to be little capex
expansion outside of North America this year, further supply
losses are likely for at least the remainder of 2017. With
growth of U.S. supply this year being suggested at 200 to 500
thousand bbl/d, and add in a generous 300 thousand bbl/d for
Canada (which may be too high), and these gains are easily
outweighed by the supply losses in other Non-OPEC supplies.
Layering in the supply reductions from OPEC, and it is obvious
that the global market still has a serious supply problem on its
hands that can only be met by tapping into inventories,
whether those be in the U.S. or elsewhere.
To make a long story short, inventory draws are already under
way in other parts of the globe and we think it is only now a
matter of weeks to one or two months before we see
significant crude oil inventory reductions in the United States,
both as a function of lower imports and the potential for
greater crude oil exports to other parts of the world of its own
(potentially) growing supply. Either way, inventories in the U.S.
and elsewhere are going lower. We think that once this
message begins to sink in, prices will be headed for a break out
to the upside."