“The leaner, meaner and more resilient U.S. shale is basically wiping out OPEC’s efforts to achieve higher oil prices with the output deal.“
“wellhead breakeven prices in the Permian Midland have dropped from $71/barrel in 2014 to $36/barrel in 2016–a 49-percent decrease“
OK, I kid about the second group (“leave it in the ground enviro-weenies”) – they brook no dissent; it is either THEIR favorite form of energy to be used or nothing. Coal, gas, oil – well, if forcing the rest of us to live as if we were back in the 1700 is “collateral damage” in saving GAIA, well, so be it. Just remember that just like the EPA not letting Alaskans use wood for heat during deep money, you won’t be allowed a wood fire with which to cook.
Obama, on the other hand, saw that his desire for America, to be just “yet another country”; his philosophy of “Leading from behind” shows exactly that. He KNEW that if American frackers were allowed to succeed, well, the resulting energy from fracking would have world-wide ramifications. He didn’t want that, so he closed down Federal lands and tried, with the enviro-weenies, to kill fracking on private lands.
Hahahahaha – didn’t work! American technology and ‘git’er done”. Glad to see it (reformatted, emphasis mine):
Has OPEC Underestimated U.S. Shale Once Again?
…With lessons learned from the oil price crash and budgets streamlined and focused on the most prolific shale plays, U.S. drillers are giving OPEC a hard time by raising output and hedging future production. Meanwhile, the cartel members are trying to cut supply and fix the price of oil at such a range that would allow them to reap higher oil revenues, but not allow the shale patch to recover too much too fast.
Two and a half months into the supply-cut deal, it looks like OPEC is losing the campaign to prop up oil prices. The drop in prices that began last week saw them retreating to almost exactly the same level as on November 30 – just below $52/barrel for Brent – when the OPEC deal was announced, the International Energy Agency said in its monthly report on Wednesday.
At the same time, reduced breakeven prices in many shale plays and forward locking-in of production is allowing the companies currently drilling in the U.S. to turn in profits even at a price of oil at $40 a barrel.
The U.S. shale patch has not only emerged leaner and more resilient from the downturn, it has also hedged future production with contracts guaranteeing the price of the crude they will be pumping a year or two from now, Bloomberg reports, citing industry executives and analysts. According to Katherine Richard, chief executive at Warwick Energy Investment Group that holds stakes in more than 5,000 oil and gas wells, many of the U.S. drillers would not see their profits reduced unless the price of oil drops to the $30s or lower.
…This is a sign that OPEC may have underestimated—yet again—the resilience of the U.S. shale patch when the cartel decided to collectively curtail oil supply.
Last week Saudi officials told American oil producers that there would be “no free rides” and that they should not expect OPEC to extend or deepen the output cuts to make up for the jump in shale production in the U.S.
Yeah? I think that was a lot of bluffing – the House of Saud is hurting in a big way as they need the oil price to be much higher. While their monetary reserves are up there, they recently started to sell bonds and their burn rate is starting to eat into those reserves – unsustainably over the mid to long term. They no longer have control and haven’t come to terms with it. Remember, two weeks ago aNOTHER American bombshell hit the Saudis with an announcement of a brand new 1.3 billion barrel field was found in Alaska – large enough to offset the decline of the current North Shore decline. With Trump ALSO reversing Obama’s “you can’t have that oil” decisions in the Gulf of Mexico and in the Atlantic, one can easily ask “what America peak oil”? that just a short few years was the mantra of the energy doomsayers.
And U.S. shale output has been steadily growing in the past few months, thanks to, and quite ironically so, OPEC’s cuts that have been supporting WTI prices at above $50 (or at least above $48 this past week). The U.S. shale patch is expected to lift its April oil output by 109,000 bpd, the EIA said earlier this week.
Profit – that dirty world that Socialists just hate – is providing not just cheaper energy to Americans (that $1.97/gal I just paid is WONDERFUL when compared to the almost $4/gal a few years ago – so much for Obama’s snobbery of “we can’t drill our way out this”).
Sidenote: has anyone else noticed how huge Obama’s “private citizen” carbon footprint has become since leaving office? Everytime I turn around he’s off jetting around on private jets. And that house – what’s the energy profile that sucker has compared the average American’s?) and has he asked other countries if he’s allowed to set that thermostate over 72 degrees?
…The drilling spirit is indeed back, and the break even prices in the best shale areas are now below $40. According to Bloomberg Intelligence analyst William Foiles, in the Eagle Ford, for example, drillers in LaSalle County break even at $36 oil price, and at $39 per barrel oil in Gonzales County.
In the Permian (and what’s a shale recovery without the Permian), wellhead breakeven prices in the Permian Midland have dropped from $71/barrel in 2014 to $36/barrel in 2016–a 49-percent decrease–the steepest among the main U.S. shale plays, Rystad Energy said in its Permian Midland review. The average wellhead breakeven price decrease in the main shale plays has been around 46 percent since 2014, Rystad Energy noted.
So, in order for the U.S. shale to start thinking of idling rigs en masse again, oil prices would have to drop and stay at even lower for longer, at below $40. The leaner, meaner and more resilient U.S. shale is basically wiping out OPEC’s efforts to achieve higher oil prices with the output deal. The cartel seems to be caught between a rock and a hard place — extending and/or deepening cuts and losing precious market share to U.S. shale, or ditching the price-fixing policy and letting the next oil price war begin.
Two weeks before I got my license, OPEC gave the US the Oil Shock – cut the supply of crude to where prices jumped to the point where this junior in high school, earning $2/hr for 10 hours/ week could barely afford the $0.75, $1, $1.25/gallon on my 1965 Rambler Ambassador (or the ’68 Chevy Camaro that replaced it). I am QUITE happy to see that the shoe is on the other foot as now the US (mainly) and other non-OPEC producers can determine the price of oil.