Art Berman was highlighted in a shared article a few weeks back here on Oilconvo, and he’s contributed articles from Forbes and other publications. In his most recent article Art is highlighting the recent swings in WTI – from a 3 year high at $66, then dropping to $59.19 in a matter of days, only to see it recover 70%. I won’t try and summarize his entire article as it’s worth a read, links provided below.
What I like most about the article is a simple truth. Through all of the data there is a warning or caution, one that I agree with. The IEA and EIA have indeed promoted a widespread belief that U.S. tight oil production will surge in 2018 and 2019. Some estimates have put the US as the potential largest oil producer in the world in the near future. Producers and analysts claim that efficiency and technology have lowered break-even prices substantially below current benchmark levels. One recent article I read put the extraction cost per barrel of U.S. tight oil between $20-$35 due to these inefficiencies.
With increased inefficiencies two things will happen, in my opinion. First, there hiring will not rise at the same rate, and the unfortunate truth that many of the jobs lost in the last downturn won’t be coming back. Second, “lower for longer” is a reality. We’ll likely see $65 a barrel for the next 5 years.
Aside from keeping investors in check, and the squeeze on companies to turn profits at this level. Having U.S. tight oil production profitable at $65 will continue to put pressure on other international producers and many higher cost offshore drilling projects.Published in