Posted on 12/02/2014 5:18:54 AM PST by thackney
Production cuts resulting from low oil prices could eliminate the growth in U.S. output over the next year and a half, according to an analysis by financial services firm Raymond James.
The report concluded that barring any cuts by the Organization of the Petroleum Exporting Countries, U.S. expected annual production growth of 1.5 million barrels per day in 2014 would have to fall to near zero over the next year and a half to close the gap between supply and demand in the oil market.
The analysis comes on the heels of OPEC’s decision last week not to prop up oil prices by cutting production among its 12 members. If the cartel’s position holds until its meeting next year, it will largely be up to U.S. producers to slow production growth and bring oil markets back into balance, the report said.
The United States could be on pace to produce about 1.5 million more oil barrels per day in 2014 than it did in 2013, according to Raymond James’ projections. The growth accounts for about 90 percent of the global supply increase.
In 2013, the U.S. pumped about 7.4 million barrels of crude from the ground each day, according to the U.S. Energy Information Administration.
At the same time, global oil demand growth has proven to be anemic as economies have cooled off in major emerging markets including China and India.
Raymond James predicted oil demand would grow by 1.1 million barrels per day over the next few years, in line with predictions from the Paris-based International Energy Agency.
U.S. onshore and Canadian unconventional drilling markets especially will feel the effects of that gap between growth in demand and supply, Raymond James predicted.
Projects in those areas would be the first to be cut as companies looked to pare back short-term expenditures. Projects such as oil sands developments and most offshore projects are longer term investments that are more insulated from oil price swings, according to the analysis.
“U.S. shale projects are all on the proverbial chopping block to right-size global production,” the report said.
The free market works, despite OPEC.
About ten years ago, I remember reading that between fracking and the sands oil projects....there was a magic number that oil per barrel had to be....in order show some marginal profits, and I seem to remember $80 as being the point where you broke even. Below that...it’s not worth the effort.
All of this brings up the odd topic...if the OPEC group wants to sustain themselves, they’d have to keep it as near $80 as possible. But it means that the profits are greatly diminished for them, and could invite major stability issues within two or three years. If this trend were to continue....I wouldn’t expect to see the Keystone pipeline being ever built.
It says that drilling permits in Texas have fallen 50%. Apparently, fracking wells must have stable short term crude price forecasts, particularly the first four years, because of the rapid decline in production from those types of wells.
80 is not high enough for Russia’s Putin to continue murdering his way across the former Soviet republics, and funneling cash to terrorists in the mideast.
While we need to continue investing in tech and infrastructure to access our domestic oil reserves, we should put an emphasis on sucking places like the Middle East and Venezuela dry first.
We started developing the Bakken and other shale fields before the price of oil had risen that high before the run up to $100.
I disagree. Being held hostage to these countries is what has caused a lot of foreign policy problems in the first place.
I’ve read recently the actual number is around $42/barrel. Bigger players will remain, smaller ones may bow out.
This will have a brutal effect on Russia, Iran, Venezuala and other countries. Saudi Arabia will be fine.
Maybe we should consider a tariff on imported oil in order to level the playing field. Same thing for goods manufactured in China, Mexico,.....
I am 100% for free trade on a level playing field.
I am also against subsidies to prop any industry up.
If we level the playing field capitalism will take care of the rest....
Also, enforce the anti trust laws!
This is why I love what Ronald Reagan did for this country. He put tax laws in place to motivate small business to expand and create jobs thus resulting in the longest economic growth in the history of our country.
The downfall was Clinton when all the mergers, especially the oil companies took place and foreign imports destroyed our manufacturing jobs. Very few people remember that Hillary was on the Board of Directors of Walmart and they funded Clinton’s primary campaign. Remember Charlie Trie and all the illegal contributions from China to the Clinton campaign that were never prosecuted. I bet Charlie Trie is back in this country keeping a low profile.
Clinton’s opened us up to be addicted to cheap China jobs while destroying our own. Don’t let foreign oil do the same to our oil production.
We already have much of the drilling done and the production has begun. Thus the capital investment is a sunk cost.
Now they must look at gross margin and operating costs.
Saudi Arabia is drilling from already drilled and aging wells. A lot of the new oil sources are vulnerable because of heavy debt. What's to stop the Saudis and their enablers from running those wells dry, then taking that money and buying up energy resources on the cheap when the owners can't pay their bills. The Saudis and their allies could end up with some freshly drilled sources without paying the full price of developing them.
Far-fetched? Look what happened to Khadafi when he got too independent and too rich.
Thought you might find the following article interesting
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I did
Texas drilling permits fall 50 percent in November, data shows
http://www.freerepublic.com/focus/f-news/3232627/posts
Posted on 12/1/2014
We’re not really held hostage to them if we can turn our own spigots on whenever we like. And they know we can.
With fracking, shale extraction, etc the US has the ability to keep OPEC largely in check. Especially if we start acting in concert with Canada (shameless Keystone plug there).
By the third or fourth year, production has declined by 90% from initial production levels in fracking wells. Therefore, new wells must be drilled, or existing wells worked over, to continue high field production levels.
The crude price forecast over the next few years is the critical variable in the decision to drill the required new wells, or to work over the existing wells, both of which require significant capital.
Maybe we should consider a tariff on imported oil
NO!
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I am 100% for free trade on a level playing field.
Then don’t suggest the US pay a higher price for oil than the rest of the world. Keep our refineries and petrochemical industry on a level playing field with the rest of the world.
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If we level the playing field capitalism will take care of the rest....
It is almost level now. Eliminate the Export Ban and our US industry can compete just fine with the rest of the world. Don’t add more restrictions and more government involvement.
It is about San Jacinto County, north of Houston, which has historically been a Democratic stronghold. Our family own property in that county and have been the victims of crime there. I am very familiar with the previously corrupt Democratic county officials, including the DA and Sheriff, who refused to prosecute crimes against an elderly member of our family, in spite of well documented proof. It is satisfying to see that they have been removed and replaced with Republicans.
Fuel costs have done much harm to the economy in the past 6 years. Food prices are crazy. Protecting the investments in wells to prevent disruption should be a priority - not sure how to do this in a free market.
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