Goldman sees slower but still robust Permian Basin growth this decade (NYSEARCA:XLE)

Crude oil futures fell on Friday but ended the week higher, supported by signs of strong US demand and a growing perception of risks from a broader conflict in the Middle East that could jeopardize oil flows from the region.

Exchanges Flames are rising between Israel and Hezbollah on the Lebanese border, along with increasingly hostile rhetoric, as Hezbollah threatens that there will be no safe place in Israel in an all-out conflict that could include Cyprus.

Houthi rebel attacks on the Red Sea continued this week, and away from the Middle East, drones from Ukraine bombed four oil refineries and other military targets in Russia.

The weekly report on US inventories also provided support with an unexpected decline in gasoline inventories as demand rose to its highest level this year.

While the four-week average of gasoline demand is still down slightly since the start of the year, it shows that “drivers who were reluctant to get on the road (have done so)” I started to get adventuroussaid Phil Flynn of Price Futures Group.

But while the overall EIA data point to a tightening US oil market, “in the near term, we believe oil demand growth in China that is disappointing market expectations is to blame.” Key downside risks to considerVivek Dhar, an analyst at the Commonwealth Bank of Australia, said.

Front-month Nymex crude (CL1:COM) settled for August delivery +3.4% This week, Brent crude for August (CO1:COM) closed at $80.73 per barrel. +3.2% for the week to $85.24 per barrel, down 0.7% and 0.6% on Friday, respectively.

Despite crude oil prices falling during the day, US July gasoline futures (XB1:COM) rose for the fourth day in a row, rising +4.8% This week to a one-month high of $2.51 per gallon.

US natural gas posted its second straight weekly loss, with the July front-month contract settling (NG1:COM). -6.1% For the week at $2.71 per million British thermal units after falling 1.3% on Friday.

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In a new analysis this week, Goldman Sachs forecasts that production growth in the mature Permian Basin is likely to gradually slow from an exceptionally strong level of 520,000 bpd in 2023 to a solid 270,000 bpd in 2026.

Goldman highlights two reasons why Permian Basin growth will continue to slow until production peaks later this decade: Geologic constraints will continue to impact growth in initial production from new incremental wells, limiting the basin's long-term production potential, the bank expects. The Permian Basin rig count will move almost sideways this year, but will fall to less than 300 by the end of 2026 as capital discipline continues for U.S. producers.

But Goldman believes Permian Basin growth will remain strong through 2026, as efficiency gains will shift the mix to newer, more productive wells, and its 2024-2025 WTI forecast of $76-$79 per barrel is just above its breakeven price of $74 per barrel. .

The energy sector represented by the SPDR Energy Sector Fund (NYSEARCA:XLE), was the second strongest performance this week, +1.9%.

Top 5 winners in energy and natural resources over the past 5 days: Nano Nuclear Energy (NNE) +122.5%nuclear energy (SMR) +19%Sasol (SSL) +18.6%Summit Mediator Partners (SMLP) +15.8%Castor Maritime (CTRM) +13.6%.

Top 5 decliners in energy and natural resources over the past 5 days: Oil Battalion (BATL) -30.5%Cross Timbers Royalty Trust (CRT) -18.9%,Power Delivery (PLUG) -15.1%Bloom Energy (BE) -15.1%flow power (FLUX) -14.8%.

Source: Barchart.com