U.S. shale\u2019s response to OPEC\u2019s decision to cut supply and boost prices: We\u2019ll take it, but we don\u2019t need it.<\/p>\n\n\n\n
In 2014, the U.S. oil industry\u2019s fate seemed to rest in the hands of OPEC ministers who were flooding the market with cheap oil in a push to obliterate them. Now, the cartel is in full retreat, agreeing to cut output to keep their own economies healthy even as U.S. production continues to surge.<\/p>\n\n\n\n
The move came in a week in which oil fell to near $50 a barrel, a price that four years ago would have panicked U.S. drillers. But since then, shale explorers have cut costs, boosted fracking efficiency and made wells longer and more productive. The result: Break evens for a 30 percent profit have been almost halved to just $45 a barrel in the prolific Permian Basin.<\/p>\n\n\n\n
\u201cThe shale industry can now thrive in a $50 oil world,\u201d David Deckelbaum, a New York-based analyst at Cowen & Co., said by phone. The OPEC decision to support prices over $50 in the U.S. \u201cunderwrites most of the industry.\u201d<\/p>\n\n\n\n
U.S. oil producers are now generating 11.7 million barrels of oil a day, about a third more than in 2014, with almost half the number of rigs. And last week, the industry became a net exporter for the first time in 75 years.<\/p>\n\n\n\n
To be sure, the breakevens companies often cite don\u2019t necessarily mean producers will be pumping big profits at $50-a-barrel oil. They exclude corporate expenses and land acquisition costs, which can be substantial. Still, they remain strongly indicative of the \u201cdrill or no drill decision,\u201d said Ian Nieboer, an analyst at RS Energy Group who sees the U.S. pumping an extra 1 million barrels a day in 2019.<\/p>\n\n\n\n
\u201cThe full pace and capability of the U.S. industry is not yet completely appreciated\u201d by OPEC and its allies, Nieboer said in an interview. \u201cEverybody is still catching up to how efficient this industry has become.\u201d<\/p>\n\n\n\n
Oil producers in the U.S. are \u201cbreathing a sigh of relief\u201d as a result of the OPEC agreement, said Saudi Arabia\u2019s oil minister Khalid Al-Falih said at a news conference in Vienna on Friday. Low oil prices are \u201cnot good for the U.S. economy,\u201dAl-Falih said, adding that America now has \u201cmore at stake\u201d alongside Saudi Arabia because U.S. oil output has increased.<\/p>\n\n\n\n
In 2014, wells drilled in the Permian, home to a third of U.S. output and the world\u2019s fastest-growing major oil field, needed a price of $86.10 a barrel to turn a 30 percent profit, according to Calgary-based RS Energy Group. Now that figure is $45 a barrel, giving producers incentive to drill at current prices. The story is similar story for the Eagle Ford in south Texas and the Bakken in North Dakota.<\/p>\n\n\n\n
OPEC and their allies, including Russia, met in Vienna on Thursday and Friday. The agreement they made was to remove 1.2 million barrels a day from the market, with OPEC itself shouldering 800,000 barrels of the burden. Following the announcement, oil in New York jumped by as much as 5 percent to $54.22 a barrel.<\/p>\n","protected":false},"excerpt":{"rendered":"
U.S. shale\u2019s response to OPEC\u2019s decision to cut supply and boost prices: We\u2019ll take it, but we don\u2019t need it. In 2014, the U.S. oil industry\u2019s fate seemed to rest in the…<\/p>\n","protected":false},"author":1,"featured_media":2144,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2132","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/2132","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2132"}],"version-history":[{"count":0,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/posts\/2132\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=\/wp\/v2\/media\/2144"}],"wp:attachment":[{"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2132"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2132"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/emimer.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2132"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}