Citi Talks Shale Oil

In a new report, analysts at Citi Research took a look at the global oil industry and gave their take on what investors can expect moving forward. Recent extreme volatility in oil prices has led to a great deal of uncertainty about the long-term price of the commodity, and Citi believes that a large portion of global oil producers could be in trouble if oil remains priced below $70 per barrel.

Four Classes Of Suppliers

In the report, analysts divide global oil suppliers, which produce a total of 93 million barrels of oil per day, into four groups:

1. U.S. shale producers (6 million b/d)
2. “Non-depletables” (19 million b/d)
3. OPEC crude (30 million b/d)
4. Non-OPEC, non-shale (38 million b/d)

Analysts believe that the first three categories of producers can continue to flourish with oil prices below $70/bbl, but that members of the fourth category of producers will be under a lot of pressure unless oil prices rebound.

Shale Leads The Way

Analysts believe that shale will continue to spread internationally and challenge OPEC producers. However, for now, the world cannot rely entirely on shale growth to meet production demands.

“The advent of shale means that the world no longer needs every identifiable ultra-deepwater or oil-sands project, but it likely needs some of them to meet incremental demand growth and to compensate for declines in already producing assets,” analysts explain.

Stock Picks

Citi’s top two shale plays are ConocoPhillips (NYSE: COP) and Devon Energy Corp (NYSE: DVN).

In addition, Citi likes Total SA (ADR) (NYSE: TOT) and Statoil ASA(ADR) (NYSE: STO).