2015 proved to be a tough year for the oil and gas industry. Hundreds of thousands of workers were let go by oil companies, Many oil companies filed bankruptcy, others managed to survive. At one point it looked as if the shale oil industry would cease to exist. Today there’s new light being shed on the future of shale oil.
Oil is setting itself up for prices only a mineral owner could hope for. We’re looking at oil potentially reaching the $200 mark and possibly flying by it. The perfect storm is brewing, here’s what you need to know.
The year 2015 and into 2016 proved to be a major challenge, as many shale oil companies all but stopped drilling. Rig numbers were cut down to levels unseen for some companies. Production slowly started dropping as a whole. As a result of the crashing crude oil prices, oil companies were drilling holes and then capping them. It was not economical to set the wells into production and pay to have it shipped. The cheapest storage point is in the ground.
As OPEC officials gathered this week to formulate a long-term strategy, few in the room expected the discussions would end without a clash. But even the most jaded delegates got more than they had bargained with.
“OPEC is dead,” declared one frustrated official, according to two sources who were present or briefed about the Vienna meeting.
This was far from the first time that OPEC’s demise has been proclaimed in its 56-year history, and the oil exporters’ group itself may yet enjoy a long life in the era of cheap crude.
Saudi Arabia, OPEC’s most powerful member, still maintains that collective action by all producers is the best solution for an oil market that has dived since mid-2014.
Oil companies are on the verge of digging the rigs out of the weeds and wiping the dust off them. Oil companies said when oil hits $60 a barrel, it’s game on.
Each rig that is set into production creates about 200 jobs. We are talking about the positions that comes along with rig operation. From moving the rigs, to running the rigs, hauling water and sand to the rigs for fracking, anything basically that has to do with drilling and production work. After the rig has finished drilling the flow back operators come in and get the well flowing. A frack team consists of several employees. The frack team gets the well flowing, then when everything is finished with the process the next crew comes in.
The new magic number in the oil industry is $50.
BP Plc, rig-owner Nabors Industries Ltd. and explorer Pioneer Natural Resources Co. all said in the past 24 hours that prices above $50 will encourage more drilling or provide the needed boost to cash flow. With oil bouncing close to $45 a barrel, an industry that has been shaving costs to stay competitive is ready for signs of stability at a price level less than half of 2014’s average.
Gary Shilling has re-upped his bold forecast for oil to fall to $10 a barrel.
OPEC oil cartel members and nonmembers, who collectively pump out about half the world’s oil, met in Doha, Qatar, on Sunday to try to agree on production limits. The aim was to provide a boost to oil prices.
However, it all ended without an agreement, in part because Saudi Arabia was not willing to sign anything without Iran on board.
Shilling first made this call in an op-ed published more than a year ago.
And right after the failed producers’ meeting in Doha on Sunday, Shilling thought he’d remind us of where he sees oil going.
Right after the futures market opened on Sunday, West Texas Intermediate crude fell nearly 7% to about $37.61 a barrel. Prices recovered a bit on Monday. Continue reading »
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