The U.S. oil-production surge continues, while oil prices remain in a fairly tight range. In fact, the growth in U.S. oil production, now projected to reach 8.9 million barrels per day by 2016, according to our estimates, is now drawing the attention of more worried OPEC.
Given the changing outlook for U.S. crude production, we’ve awarded U.S. refiners with narrow economic moats, as we think the group will benefit from a low-cost advantage thanks to access to cheap WTI oil.
The domestic natural gas price outlook is still looking healthy. We are returning to a more normalized demand environment after extremely warm winters in 2011-12, which is coupled with a weak supply environment. Production, storage, and drilling activity levels provide strong support from natural gas prices, which have already doubled from year-ago levels.
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