Myles Udland, Business Insider | December 1, 2014 8:40 AM ET
More from Business Insider
Posted on 12/01/2014 2:15:44 PM PST by ckilmer
Myles Udland, Business Insider | December 1, 2014 8:40 AM ET
More from Business Insider
Oil is getting slammed.
On Thursday, OPEC announced that it would not curb production to combat the decline in oil prices, which have been blamed in part on a global supply glut.
And now that oil prices have fallen more than 30% in just the last six or so months, everyone wants to know how low prices can go before oil projects start shutting down, particularly US shale projects.
In a note last week, Citi’s Ed Morse highlighted this chart, showing that for most US shale plays, costs are below $80 a barrel.
Citi
Morse writes that if Brent price move towards $60 — they’re currently around $72 — a “significant” amount of shale production would be challenged.
But Morse also highlighted this dizzying chart, listing the breakeven price for every international oil company project through 2020. (You can save it to your computer and zoom in for a closer look.)
Citi
The US shale plays
It won’t be just US oil drilling that will be shrunk by lower oil prices. A lot of oil drilling around the world will shrink.
I’m reading elsewhere that the advantage of fracked horizontal wells over vertical wells is that they can be turned off and on pretty much at will without hurting future production.
That means that the price drop will mothball all the expensive wells pretty fast. But just as quickly, when prices turn around, they can be turned back on.
So the dip in oil prices could go pretty low but it will light a match under the world econonmy and push oil prices up. US oil drillers will be the first to market when prices return higher.
I’m reading elsewhere that the advantage of fracked horizontal wells over vertical wells is that they can be turned off and on pretty much at will without hurting future production.
That’s good to know. That will keep the Saudi from getting too greedy. I am not sure if they can adapt to a lower standard of living where they have to answer to markets.
The one thing we have to do if keep Obama and the libs from making it too hard to get our oil in the future.
Very true. I suspect Offshore will be hurt worse than onshore tight formations.
I would want to read more about that. Right now I have significant doubts about that.
AFAIK, "fracking" is more a matter of degree than kind in the oil business these days.
The charts shown here could be very misleading or quite accurate depending on the parameters used in devising them.
Bump for later
Remember that all the extended Saudi Royal Family types depend upon Aramco for their walking around money. If it pinches too tight, the head of the family could take dead.
It has happened before.
File this away for further reference
(Keep in mind the Payne/Dunham Obama family trust and the source of its income)
ping
Remember that all the extended Saudi Royal Family types depend upon Aramco for their walking around money. If it pinches too tight, the head of the family could take dead.
It has happened before.
So true. They’re all used to living like royalty. It won’t bother me if it stresses them some.
” they can be turned off and on pretty much at will without hurting future production.”
But shutting in wells is not permitted under oil leases, in that the leases expire if wells are not producing (or there is continuous drilling).*
* Yes, I know there are lots of exceptions. But low price is not one of them.
Very true. I suspect Offshore will be hurt worse than onshore tight formations.
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Seems to me that I’ve read that the US gulf drilling was profitable with oil prices below $60@ barrel. But likely drilling in colder deeper waters like the north sea is more expensive. The Norwegians have already shelved at least one big project that I’ve read about.
Market forces will prevail if the cursed federal government will just stop trying to destroy the industry.
Very true. I suspect Offshore will be hurt worse than onshore tight formations.
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Judging by the graph above —it looks like about a Quarter of world wide oil production gets unprofitable with prices below $60@ barrel.
So any fall below $60 will be short lived.
Bookmark.
Our materialism has turned us into slaves of consumerism. Well, most human cultures have been like that. But we are supposed to be so educated, smart, savvy and BEYOND that. :o) I guess not.
If they get in the game its Katy bar the door, no?
According to the Wikipedia, China is #4 in the world, below the US and above Canada.
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