for Low Oil Prices
The current stability is relatively rare for the oil market, which is prone to rampant volatility for numerous reasons. When the market eventually breaks out, it could do so aggressively.
Independent producers are struggling to hit output targets at current price levels while the majors are focusing on becoming more efficient.
Despite strong gains in shale production in 2017, the rebound does not necessarily mean the industry is healthy. A new report finds that even some of the largest shale players won’t be cash flow positive until 2020.
OPEC’s gamble to cut production to shore up prices has not worked out the way members thought it would, but the cartel cannot be faulted for not trying. The inadequacy of its policy in the first part of 2017 means that OPEC will do whatever it takes during the second half of the year to achieve its goals.
Speeding up the process is good news for the industry in that there are plenty of untapped offshore reserves. However, many companies may choose to withhold capital investment given the current low-price environment and typical long-cycle investment in offshore production.
North Dakota is looking to manage its resources and finances prudently to keep as much damage from oil price volatility at bay and develop longer-term sustainable growth through deeper economic diversification.
Both the oil and car industries require deep capital investments and long lead times, and at times are rocked by global macroeconomic forces beyond their control. Right now, they are taking opposite strategies.
The recent increase in floating storage is an ominous sign that the OPEC cuts may not balance the market, and it also poses a threat to the ambitious drilling campaigns by U.S. shale companies that are still recovering from the price crash to below $30 in early 2016.
There are some signs that the U.S. shale industry is bumping up against its productivity limits, which could lead to lower-than-expected output gains or rising drilling costs.
Although some hold onto bullish sentiment, traders are skewed toward a downside or rangebound bias in the near term—OPEC has lost credibility, the large inventory overhang persists, shale’s resurgence and a rising rig count continue, and the spat over Qatar didn’t affect the market. None of these factors should change anytime soon.