En Español



Very usefull links



PW
Bookstore





Institutional
links


OPEC
\





 




PW
Business Partners

 


IRAQ OIL

THE FORUM

 


Blogspots

FxHQ Forex News

The Global Barrel

Tiempo Cultural

Gustavo Coronel

Iran Watch.org

Le Blog des
Energies Nouvelles

News Links

AP

AFP

Aljazeera

Dow Jones

Oil price

Reuters


Bloomberg

Views and News
from
Norway

 

 


Opinion

 

Nick Cunningham: OPEC can
only push oil prices so high


“shale may ultimately be too productive as WTI approaches $70/bbl.
As a result, we have taken our long-term WTI forecast
from $67.50/bbl to $62.50,”
 Credit Suisse analyst  wrote .


With oil prices back up above $50 per barrel, more and more shale companies could find it profitable to resume drilling. But the improved prospects for shale companies, and the subsequent uptick in drilling and production, could once again put pressure on prices.

Improved drilling techniques, efficiencies, and the ability to extract more oil and gas per drilled well has allowed for cost savings across the industry. That could ultimately put a ceiling on oil prices not just in 2016 but over the long-term, investment bank Credit Suisse recently said. Higher oil prices will lift all boats, but  “shale may ultimately be too productive as WTI approaches $70/bbl. As a result, we have taken our long-term WTI forecast from $67.50/bbl to $62.50,”  Credit Suisse analyst  wrote .

The result could be a shale band, in which supply falls when prices dip below roughly $40 per barrel, but production rebounds above, say, $50 per barrel. But if prices get too high – closer to $60 per barrel and higher – then enough supply comes back online to push prices back down again. This  theory  has been offered from various outlets over the past year or two, but it hasn't truly been tested yet.

There have been a few instances in which oil rallied but eventually ran out of steam – in the summer of 2015 and to a lesser extent in the summer of 2016 – which provides some evidence for the shale band theory, but the real test will come when shale production starts to rise again and at what price level. If the shale band theory ultimately plays out, and the market is restricted by a floor and ceiling, the upshot is that oil prices could remain low for years to come.

Interestingly, Credit Suisse says this could be beneficial to some drillers. While pretty much every company would like to see oil prices go much higher, shale producers with lower costs that can turn a profit with oil trading below $60 per barrel may thrive in this environment. “Operators at the low end of the cost curve in particular would benefit from crude remaining more range bound as returns at current prices justify development and less activity in higher cost basins would likely push out pending cost inflation,”  Credit Suisse says.

In other words, if oil prices rose too high – back to triple-digit territory, for example – then the cost reductions achieved over the past two years would likely go up in smoke. The cost of equipment, drilling services, rigs and personnel would all see inflation along with the oil price. So shale drillers comfortable with $50 oil may not necessarily be desperate to see oil prices spike much higher.

These drillers are increasingly found in the Permian Basin in West Texas, where a  land rush continues. Multiple layers of shale can be found in the Permian, which allows companies to tap more oil and gas per vertical well. The returns are better, and as a result, breakeven costs are lower. That has companies packing up from the rest of the country and moving to West Texas. RSP Permian Inc. just agreed to pay $2.4 billion to take over Silver Hill Energy Partners. The deal means that RSP is essentially paying about $45,000 per acre to drill in the Permian's Delaware Basin, which  Bloomberg  says could be the basin's highest price per acre ever recorded.

The rush to the Permian has come at the expense of places like the Bakken. North Dakota's oil production  dropped below  1 million barrels per day in August, the first time that the state produced less than 1 mb/d in two years. In August the state produced 981,000 barrels per day, down from a peak of 1.23 mb/d in December 2014. "It does send a signal to the world markets that U.S. producers are serious about reducing activity, reducing costs, reducing production and I think that should help support the recent price increase we saw," Lynn Helms, director of North Dakota's Department of Mineral Resources, told reporters.

It remains to be seen if the Bakken will rebound with oil prices in the $50s per barrel. But for North Dakota, that may be all they can hope for – if Credit Suisse's prediction plays out, oil prices may not rise much higher than that for a very long time.

By Nick Cunningham of Oilprice.com


Nick Cunningham is a Vermont-based writer on energy and environmental issues. Petroleumworld does not necessarily share these views.

Editor's Note: This commentary was originally published by oil price.com , 10/14/2016. Petroleumworld reprint this article in association with Oil Price.com. Link to original article.

All comments posted and published on Petroleumworld, do not reflect either for or against the opinion expressed in the comment as an endorsement of Petroleumworld. All comments expressed are private comments and do not necessary reflect the view of this website. All comments are posted and published without liability to Petroleumworld.

Use Notice:This site contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of issues of environmental and humanitarian significance. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml.

All works published by Petroleumworld are in accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes.Petroleumworld has no affiliation whatsoever with the originator of this article nor is Petroleumworld endorsed or sponsored by theoriginator.
Petroleumworld encourages persons to reproduce, reprint, or broadcast Petroleumworld articles provided that any such reproduction identify the original source, http://www.petroleumworld.com or else and it is done within the fair use as provided for in section 107 of the US Copyright Law.

If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from the copyright owner. Internet web links to http://www.petroleumworld.com are appreciated

Copyright© 1999-2009 Petroleumworld or respective author or news agency. All rights reserved.

We welcome the use of Petroleumworld™ stories by anyone provided it mentions Petroleumworld.com as the source. Other stories you have to get authorization by its authors.Internet web links to http://www.petroleumworld.com are appreciated

Petroleumworld welcomes your feedback and comments,
share your thoughts on this article, your feed. back is important to us!

Petroleumworld News 10/17/2016

.

We invite all our readers to share with us
their views and comments about this article.

Follow us in : twitter / Facebook


Send this story to a friend Write to editor@petroleumworld.com

By using this link, you agree to allow PW
to publish your comments on our letters page.

Any question or suggestions,
please write to: editor@petroleumworld.com

Best Viewed with IE 5.01+ Windows NT 4.0, '95,
'98,ME,XP, Vista, Windows 7,8 +/ 800x600 pixels

 


 

 



TOP

Editor & Publisher:Elio Ohep F./Contact Email: editor@petroleumworld.com

Contact:
editor@petroleumworld.com/ phone: Office (58 212) 635 7252,
or Cel (58 412) 996 3730 / (58 414) 276 3041 / (58  412) 952 5301


CopyRight © 1999-2010, Elio Ohep F.- All Rights Reserved. Legal Information

- CCS Office Tele
phone/Teléfonos Oficina: (58 212) 635 7252

PW in Top 100 Energy Sites


Technorati Profile


CopyRight © 1999-2016 Elio Ohep F. - All Rights Reserved.
This material may not be published, broadcast, posted online, rewritten or redistributed by any type of means, except with permission of the author/s

The information in this web site is proprietary and is protected under United States and International Copyright and Trademark laws. No part of this web site may be reproduced or transmitted in any form by any means whatsoever, except with permission of the author/s..

Petroleumworld encourages persons to reproduce, reprint, or broadcast Petroleumworld articles provided that any such reproduction identify the original source, http://www.petroleumworld.com or else and it is done within the fair use as provided for in section 107 of the US Copyright Law. If you wish to use copyrighted material from this site for purposes of your own that go beyond
'fair use', you must obtain permission from the copyright owner.
Any use of this site or its material, in any form, without the express prior written consent of the author, is prohibited by law and is subject to legal action. Legal Information

Top 100+

Technorati Profile
Fair use notice of copyrighted material:

This site is a public free site and it contains copyrighted material the use of which has not always been specifically authorized by the copyright owner.We are making such material available in our efforts to advance understanding of business, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed without profit to those who have chosen to view the included information for research, information, and educational purposes. For more information go to: http://www.law.cornell.edu/uscode/17/107.shtml. If you wish to use copyrighted material from this site for purposes of your own that go beyond 'fair use', you must obtain permission from Petroleumworld or
the copyright owner of the material.