Posted on 02/21/2017 1:42:46 PM PST by bananaman22
Two years ago, when Saudi Arabia launched an unprecedented campaign to crush high-cost oil producers, in the process effectively putting an end to the OPEC cartel (at least until last year's attempt to cut production), it made a bold bet that U.S. shale producers would be swept under when the price of oil tumbled, leading to a tsunami of bankruptcies, as well as investment and production halts. To an extent it succeeded, but where it may have made a glaring error is the core assumption about shale breakeven costs, which as we reported throughout 2016, were substantially lower than consensus estimated.
In his latest note, BofA's Francisco Blanch explains not only why a drop in shale breakeven costs is what is currently the biggest wildcard in the global race to reach production "equilibrium", but also why U.S. shale oil production could surge in the coming years, prompting OPEC to boost production in hopes of recapturing market share. Specifically, Blanch predicts that U.S. shale oil production could grow by a whopping 3.5 million barrels per day over the next five years.
(Excerpt) Read more at oilprice.com ...
Drill Baby, Drill!
Channeling legendary sportswriter and novelist Dan Jenkins, ‘hey Abdul, better learn to pan fry them cobras’.
Has there been any speculation of Trump opening ANWR for drilling?
Cut off all pipeline flow of gas and oil products withing a 100 mi. radius of the NYC Governor’s Mansion, now surrounded by a high wall/fence.
Thank you, Texas oil men. You are the BEST!
Take THAT, Obama!
The price should be fairly stable going forward as cost of production will control since the Saudis have probably learned their lesson.
So, just riding those dividends here.
Not good for the oil price.
Net oil imports: 5.0 million bpd
Anticipated rise in production (by 2022): 3.5 million bpd.
Net oil imports, 2022: 1.5 million bpd.
Petroleum use should be pretty steady, based on past decade and future fuel economy.
Pretty close to energy independence.
Furthermore, the actions of such giant "vendor-financing" providers as China (seen best in the case of Venezuela, where China continues to provide Caracas with much needed funds in exchange for far below market oil deliveries) remain unpredictable, and may afford these non-core OPEC nations just the funds they need to also steal market share from Saudi, Iraq and UAE.
While Venezuelans starve, the socialist regime is kept alive by China. The sweetheart oil deal with China means that there's even less petroleum revenue to hold up the Venezuelan economy. Zimbabwe, here we come!
Does China own Citgo now?
That is an average. Many wells are below that level. The Sauds acted as if the average was a hard line that cut through everybody. It is the nature, too, of free market capitalism, that costs of production decline continuously. If costs are too high to produce at a certain level, the Sauds win temporarily by undercutting it. SOme companies bankrupt. Others cease production. But other comanies are buying up the bankrupts' assets and they and the survivors are working hard to reduce costs and increase efficiency (same thing) and go back into production when they have become profitable again. Saudi oil is a state monopoly and ultimately cannot compete in the free market so long as the Saudi government receives the profit. Social and military spending (and corrupt diversion) will always rise to the level of the revenue and becomes painful to reduce. With the government in the USA backing off, the the Sauds are stuck with an overhang which will come down slower(voluntarily) than the fall in revenue. We win. Sauds lose.
We could be energy independent right now, beginning with a higher price for oil domestically produced if we simply cut off oil imports altogether. That higher price would then come steadily down as production increases and gets cheaper. Not advocating that for a number of reasons but it would happen were it done that way.
Odd thing: According to their underlying projections, U.S. oil production would increase so much at $70 per barrel, we’d become oil exporters. At $80 per barrel, we’d be exporting 2 million bpd.
At importing 5 million bpd, we run a $90 billion trade deficit on crude oil. (We actually do much better still because we make a lot of money refining oil.) In 2005, that deficit was $270 billion. At $80 a barrel, we’d make a $50 billion surplus (plus about $90 on refinement).
Just imagine what this means: Next oil price shock, the higher oil costs will mean the U.S. economy does BETTER because of the higher cost of oil.
Right now just about every major oil producer or services company is LOSING money.
For those in the know, I have a question.
What will change that, and will it change in light of oil prices staying the same or going lower?
Appreciate your well qualified opinion.
If they are losing money why are they putting more rigs in the field?
http://www.aogr.com/web-exclusives/us-rig-count/2017
Shale 2.0 could drive costs down to $5 - $20/bbl. http://www.nextbigfuture.com/search?q=shale+2.0
We have multiple Saudi Arabias worth of shale reserves, and if big computing allows anything near these prices for production, we will export a LOT even at $50/bbl., let alone a higher price.
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