Anyway you slice it lower oil prices are a big plus to the world economy. A pick up in world economic activity will sop up the excess supply.
What I took from the article is the US shale oil production may be far more resilient than expected. The real pain will be felt by Venezuela, Russia, Nigeria and others using oil income to support their socialist economies. Even the Saudis are at risk here as it is estimated they need mid 80 prices to pay for all of their social programs. Of course they have a big cushion in cash reserves.
"ompanies are getting more oil per dollar spent drilling, driving costs down by as much as $30 a barrel since 2012, Morgan Stanley analyst Adam Longson said in a report Oct. 13.
“Prices aren’t low enough to put these projects at risk,” Matthew Jurecky, head of oil and gas research for the London-based research company GlobalData Ltd., said by e-mail yesterday from New York. “The profit margin on most commercial unconventional oil plays will support prices as low as $50, many below that even.”
U.S. shale producers could keep pumping oil economically even if Brent dropped to $60 a barrel, Bjornar Tonhaugen, an analyst with Oslo-based Rystad Energy, said in an e-mailed report yesterday. Brent would need to remain at $50 a barrel for 12 months for North American shale output to drop by 500,000 barrels a day, he said. Morgan Stanley (MS) said break-even costs at the Eagle Ford shale formation in Texas range from $30 to $60 a barrel.
“We continue to be impressed by how much operators are improving their operations,” R.T. Dukes, an upstream analyst for Wood Mackenzie Ltd. in Houston, said yesterday by phone. “There’s enough out there that significant development would continue even at $75 or $80.”
They just may find that US Shale production is more resilient than they have hoped for
Saudi Arabia has “appeared determined to defend its market share” in Asia, even at the expense of lower prices, the IEA said in a report yesterday. Kuwait’s oil minister said there may be “no room” to restore prices by trimming supply. Saudi Arabia, Iraq and Iran are offering the biggest discounts to crude buyers in Asia since at least 2009, amid speculation they are seeking to maintain market share.
“It makes perfect sense for Saudi Arabia to let the price drift down,” said Jamie Webster, an analyst in Washington at IHS Inc. “There’s a lot of discussion on what is the break-even price for shale, and whatever you believe, the reality is there’s no clear consensus. It gives the Saudis the opportunity to test” that level, he said.
Iran, OPEC’s fifth-biggest supplier, isn’t concerned about the drop in prices, which will pass, Roknoddin Javadi, deputy oil minister and managing director of National Iranian Oil Co., was quoted as saying by Mehr, the state-run news agency.
About 2.6 million barrels of daily production, or 2.8 percent of global output, requires an oil price of $80 a barrel or more to be profitable, the IEA said. Only about 4 percent of U.S. shale output needs prices above that level, it said. Canadian synthetic oil projects are the most dependent on high prices, with about a quarter needing oil to remain above $80, the agency said.
Horizontal drilling and hydraulic fracturing in hydrocarbon-rich underground shale layers have helped U.S. oil production grow 65 percent in the past five years to the highest level since 1986. That’s reduced crude imports by more than 3.1 million barrels a day since peaking in 2005.
Production per well was projected to increase in fields in North Dakota, Texas and Colorado, the Energy Information Administration said yesterday. Companies are getting more oil per dollar spent drilling, driving costs
There is no fixed number. It will vary by well and drilling unit. Those in the heart of the play with the higher pressure wells and doing production pad drilling to reduce costs are going to be in the best shape. Add in immediate access to services such as gas, oil and water disposal pipelines and the costs go even lower.
The drop in oilers has been so huge that those traders with even modest margin in their account may find themselves in serious trouble. I have no doubt that margin calls are contributing to the drop we have seen in the market.
The oil industry has added millions of jobs to the economy when nothing else worked. Have to agree with P47 that going back to $1.75 gas would be a big problem.
Thing is it will never happen. Plentiful reasonably priced energy drives world growth and we are now in a period of plentiful reasonably priced energy. The world economy will quickly sop up this excess supply
What it is is a huge prime to the world economy. If it gives the economy a jolt supply will tighten and prices will rise quickly.
You fail to understand the economics of these wells. Clearly many were drilled at less than optimum returns to hold the lease by production. The land in the Bakken is now 100% held by production. Now the goal is to lower cost and increase production. Cost are down by 40% or more. New and improved fracking techniques continue to show great results in improved production. These wells are reaching payout in 18 months or less. Well densities are up 16 per 1280 acre drilling unit and rising. There are decades of drilling opportunities left
Google this ..... Oil and Economic Growth
A Supply-Constrained View
A great pdf presentation giving a perspective on greater supply driving economic activity, not lower prices.
Below is a small part of an article on ISIS and Wahhabism. The official sect of the Saudi royal family. Ask where ISIS funding came from and then understand ISIS is already firmly embedded in Saudi Arabia. And to top it off the Saudis are building a massive fence on the Iraq border
Google the title to get the whole article for the NYT
ISIS’ Harsh Brand of Islam Is Rooted in Austere Saudi Creed
By DAVID D. KIRKPATRICK
SEPTEMBER 24, 2014
BAGHDAD — Caliph Ibrahim, the leader of the Islamic State, appeared to come out of nowhere when he matter-of-factly proclaimed himself the ruler of all Muslims in the middle of an otherwise typical Ramadan sermon. Muslim scholars from the most moderate to the most militant all denounced him as a grandiose pretender, and the world gaped at his growing following and its vicious killings.
His ruthless creed, though, has clear roots in the 18th-century Arabian Peninsula. It was there that the Saud clan formed an alliance with the puritanical scholar Muhammed ibn Abd al-Wahhab. And as they conquered the warring tribes of the desert, his austere interpretation of Islam became the foundation of the Saudi state.
Much to Saudi Arabia’s embarrassment, the same thought has now been revived by the caliph, better known as Abu Bakr al-Baghdadi, as the foundation of the Islamic State.
“It is a kind of untamed Wahhabism,” said Bernard Haykel, a scholar at Princeton. “Wahhabism is the closest religious cognate.”
Sewells, very sad but true commentary on the American public. True comprehensive history is not being taught in this country and we will pay the price eventually
At this point just hold on tight as that cycle goes both ways. Once you run the price down demand ticks up in a large way and up goes the price, less some new supply that was never brought on line when the price fell
With the 3rd quarter in the books we are about to see how hedges can play a dramatic role in a companies earnings on the positive side. Should be a nice contribution to the merger
These guys have an interesting technology for small vein rock mining. Called thermal fragmentation and is designed to greatly reduce waste or dilution and send higher grade ore to the mill. They have some nice presentations on their web site.
Perhaps applicable to Red Lake?