US Production declines set to continue into 2017 — US light tight oil (LTO) production response is lagging rig counts by 6-7 months, based upon legacy well decline rates and rig productivity. Our Base Case expects LTO rig counts to take another drop in 1q16 and remain low through most of 2016. Initial signs of market re-balancing in 2h16 should allow a modest price recovery and some rig additions in late-2016. LTO output needs to decline by 1 mbpd to balance global oil market, in addition to other non-OPEC production declines. The December 2015 Short-term Energy Outlook (STEO) by EIA had forecast Brent prices at $56/bbl in 2q16, with resultant rebound in US production, but this is not realistic and does not balance the market. Download presentation on US Crude Exports here.
