Posted on 10/25/2014 6:30:08 PM PDT by 2ndDivisionVet
Crude oil prices have dropped below $80 a barrel, down more than 20 percent just since June, meaning price estimates by the U.S. Energy Information Agency (EIA) have been far too pessimistic. And these low prices — and the fear that they could go even lower — are making a number of oil industry people increasingly nervous, with some prediciting that the prices are getting so low that oil companies are going to stop new drilling and even cut back on production from already drilled wells.
On October 7, the EIA estimated that prices for West Texas Intermediate (WTI) crude oil will average around $95 a barrel in 2015 while its estimate for Brent crude — the benchmark for more than half of the world’s crude oil supply — would be more than $100. With December delivery of oil on the New York Mercantile Exchange at $80.61 on Friday (and touching a 52-week low of $79.10 a few days earlier), the EIA’s estimates may turn out to be off the mark by 20 percent or more.
The drop in demand and the increase in supply, thanks to the fracking revolution (hydraulic fracking coupled with horizontal drilling), is causing consternation locally as well as internationally. Saudi Arabia, the swing supplier in OPEC, at first cut its production earlier in the year by 400,000 barrels per day in a failed attempt to halt the decline in prices. When that didn’t work, the Saudis capitulated and cut their prices in order to maintain their market share. This has precipitated a price war as small OPEC members have begun to cut their prices as well....
(Excerpt) Read more at thenewamerican.com ...
Not to worry. As soon as the election is over, we’ll see prices jump back up to ‘Obama normal’. In the mean time, I am sick of watching people get giddy about gasoline prices that are still a dollar a gallon higher than they were when Obama got elected.
WAG is incorrect.
God rest your Mom’s soul. I don’t think my Mom has much longer in this world, but she did have a similar take on Wolf and asked for an absentee ballot to vote against him, which I got and she marked.
No one wants to drill at a loss. On the plus side, fracking sets a limit on how high oil prices can go.
Let me call on our FRiend Thackney, who has much more expertise and information on costs of production with US fracing and OPEC (Saudis).
National security trumps profit and loss.
1. The last line of the article refutes the alarmist headline, to wit, “At present, however, it’s far too early to be calling a top in the fracking boom.”
2. I’m as confident of New American’s (The John Birch Society) take on energy as I would be from, say, CNN. I’ll call it click bait.
Nothing new. The oil and gas business has always been subject to boom and bust in Texas. That’s why Texas maintains a “rainy day” fund to smooth out the bumps in the Texas economy when oil tax revenues decline.
I’m fairly certain there will be a slight correction after the elections are over. But after ISIS is restrained from selling Iraqi oil at black market prices, there may be a big correction in world oil markets.
The very first frac job was in Oklahoma in about 1949 and since the US has fracked 600,000-700,000 wells.
Fracking is nothing new, the horizontal drilling is what is making the huge strides. With those huge strides comes some new difficulties in fracking technique but that has been solved with staged fracking.
The market is self correcting if the government would just stay out of it.
A repairman was here last week and chatted as he worked. One of the topics was the fracking boom, how a friend of his was making the best money of his life just driving truckloads of oil that would be moving through the Keystone XL pipeline opposed by the Demagogic Party in DC and Colorado. Keeping the cost high is a goal of the Dhimmicrats. Thanks 2ndDivisionVet.
Looks like Thack is sleeping in maybe I can help. When the price of oil goes down so does the cost of exploration, drilling and producing. Lease agreements also effect cost’s and those can always be renegotiated. To put a bottom line price is difficult due to the variances in agreements. Right now I schedule my drilling almost a year in advance due to the lack of rigs, when the price goes down there’s more rigs available and they compete for the work. As far as mineral’s go we own over 750 sections with 42 sections of that being minerals and surface. We’re not the only ones in that situation and we can survive when others shut the doors. In 98 when the price of WTI went below 10 dollars a barrel we started our largest drilling program due to the extremely low costs. All drilling was done on the 42 sections where we owned both surface and minerals, we still have room for 80 to 100 wells. During that time the majors had shutdown and started laying off while we expanded.
The only MORONS who will say the fracking boom is over will be liberals who are hoping it is over.
FReepers understand supply/demand.
So have I. What is different this time is the political landscape. I guess there is close to 55-60% of nation's political leaders who would like to thrust a knife into the oil industry. During the big bust of the early '80's that was not the case. Add the facts, that (1)demand is not increasing at the same rate (on a percentage basis), (2) world economic dynamics are weak, and we "might" see a longer bear oil market than we think.
What is most ironic, is the majors (and mid caps for that matter) even 2 years ago were thinking being de-intergrated was the thing to do. Watch that change drastically, and those that did start squeeling when margins start their squeeze play.
I do not see a repeat collapse of the early '80's and $10/bbl oil though. $50-$60 is the absolute floor.
Thinking further, maybe $40-$50 sustained floor with $35 dips in a scorched earth scenario.
That will be a day to get OPEC a box of tissues.
When the price of oil goes down so does the cost of exploration, drilling and producing.
That is a difficult concept to grasp if supply and demand is left out of the equation.
I’m getting less for my product, but the price of exploration, drilling and producing would appear to remain somewhat constant due to labor costs. Drilling rigs could be idle and so more available to drill thus oversupply and reduced demand. Producing, less available crude equals competition for available crude. Not sure I’m looking at it correctly.
lol
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