My trip to the US in November was to better understand the economics of the various shale oil basins and the strategies being pursued by oil producers, to assess whether the oil price recovery assumed by the market is realistic or overly optimistic. I was of the view that the current $40/barrel oil price is unsustainably low and that a price closer to $70 would be required to stimulate the medium-term 0.5-1.0mbpd growth in US oil production that is required based on our demand and supply assumption. However from an investment perspective, the pace of the recovery is a more important element in timing our exposure to the sector. I came back with a view that the oil price is more likely to remain in the $40-50/barrel range in 2016 than to move above $50, and that therefore earnings of oil-producing companies will continue to disappoint. Follow the link to read the full wrap-up of my trip. (VIEW LINK)
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