Disappointment over demand growth forecasts in China and WTI below $70 may discourage U.S. drillers from investing more in new production.
for Forbes. In it, Blackmon pointed out that inflation has a big role to play in production growth decisions, as does disappointment with the pace of China’s economic recovery and Saudi Arabia’s decision to reduce production by 1 million bpd.
China appears to have been the big disappointment for executives that may have had just a little bit too much faith in growth projections. Despite record oil demand and surging oil imports, there seems to be a skepticism about China’s oil demand dynamics based on monthly economic . And, as Blackmon notes, this will inform investment decisions in U.S. shale over the second half of the year.
Even so, supply is unlikely to reverse the current trend in U.S. shale. Inflation remains a top concern and so does China. Those shareholders have no doubt heard the latest from China, which is a further deceleration in factory activity and lower exports, which Goldman Sachs to revise down its oil price forecast for the third time this year. And this means the pressure will remain, to complement inflation.
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