Whether to resume the growth of shale oil at 50 USD per barrel

Whether to resume the growth of shale oil at 50 USD per barrel

In the last few months on the market of hydrocarbons there is a strong switching growth. The price of a barrel had grown to 50 USD. And now many experts are wondering what will happen in the future and whether slate company re-enter the market in its entirety?

No one has a clear understanding of the current situation. If we compare with the year 2015, when the cost of hydrocarbons has risen to 60 USD per barrel, the number of installations for drilling in the United States ceased to fall and the indicator has stabilized. Some companies have begun to invest in creating new wells. Then they thought that the market has come full turn.

However, by taking such steps they have got the completely opposite effect. The price of a barrel fell due to concerns of increased production. And starting from August 2015, the number of drilling rigs decreased by almost 500 in nine months.

And now, when the price of a barrel stood at USD 50, many experts question whether the growing number of installations for drilling? This factor depends primarily on whether companies expect to profit with the current price of oil.

In order to try to find the answer to these questions, you can refer to several main factors that will determine how quickly the company will be able to re-start drilling.

The most important indicator is the equilibrium drilling in a number of major shale regions of the United States. According to recent reports, the company is still suffering losses, even at the price of 50 dollars per barrel.

The break-even level in different areas may vary. For example, in the Eagle Ford it is at around 59 dollars per barrel. In the Bakken this figure is higher and reaches 67 dollars per barrel. This suggests that North Dakota drillers continue to incur losses.

With regard to West Texas, where many beneficial parts of the Permian Basin have higher break-even points than the experts say. Moreover natural gas situation is almost the same. It turns out that, in order to operate at a profit, for most companies in the US profitable are even higher prices. And given the fact that the oil price crisis has driven many companies into debt, it can be assumed that they have good prices start at $ 80 per barrel. And this applies the most profitable areas of the US.

At the same time, many experts tried to convince the markets that comfortable the price per barrel for American shale oil earners is at the level of 30-40$. But if that were the case, then to the current time, the number of companies in this industry would be great. During this time, more than 70 shale companies have declared themselves bankrupt.

Further proof that prices in the $ 30-40 are very uncomfortable for the US shale market is the fact that over the past year and a half the level of production in the USA fell by almost 1 million barrels. At the same time, the number of drilling rigs for the same period decreased by 75%. And in the current situation crude oil prices are very low for those companies and they’re not able to profit on them.

If currently shale oil earners can not get profit then, probably at 60 dollars per barrel, they are unlikely to resume drilling with the same optimism. Moreover, many experts believe that the drillers will now be even more careful.

We can assume that oil prices will continue to rise. Although it will be accompanied by corrections. If the Fed decides to raise rates, maybe the correction in the oil market will be slightly deeper and the price will again fall below 50. But overall, in the long term, the price of a barrel will only grow. And this point can be used in binary options trading.


Share to: