For the past month, WTI crude oil prices have averaged $49/bbl, trading within a relatively narrow $7/bbl range. Two years ago, this price would have been devastating for producers, but not so in late 2016. The crude directed rig count is up by 127 since May, +11 just last week. U.S. crude production is down about 1.2 MMb/d since April 2015, but over the past three months has stabilized at 8.5 MMb/d. On the gas side, since the second quarter of 2016 a combination of lower natural gas production and higher demand (from the power, industrial and export sectors) has worked off a big inventory surplus. Consequently, U.S. natural gas prices are up more than 70% since March, even considering the big price drop over the past week. NGL prices are at the highest value relative to crude for any October since 2012. Is this it? Is this what a Shale Era recovery looks like? In today’s blog, we consider a possible road map for the next couple of years. Warning, we have also included a short infomercial for RBN’s School of Energy next week in Houston.
The abyss was the first quarter of 2016, and it looked like the blue bar in Figure 1. Oil, NGLs and natural gas are shown in $/MMbtu on the left scale, and in $/bbl on the right scale. On February 11, crude dipped to $26.21/bbl. Two weeks earlier, the basket of NGLs hit rock bottom––$3.22/MMBtu, or about $13/bbl. In March, natural gas dropped to $1.64/MMBtu.
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About the song
“The Abyss” is a 2014 tune from the album Back from The Abyss by Orange Goblin, a UK heavy metal band. Formed in 1995 and originally known as Our Haunted Kingdom, the band has released eight albums with memorable titles like Time Travelling Blues (1998), Healing Through Fire (2007) and A Eulogy for the Damned (2012).
Comments
good piece but would disagree with the observation that "other producers are stuck with the same economics." If anything, offshore efficiency has beeneven greater (because it had so much more to work with). many examples of this, but very simple one is Statoil's Johan Castberg project, where the breakeven has gone from $80 to $45 (and they're hoping for $40 by FID next year) - this is a frontier, deepwater project. australian onshore producers (small) have cut breakevens to $25. many more examples.
this would be worth a blog, happy to provide more examples.
Great blog entry as usual. Thanks. But looming U.S. recession would be an 800-pound gorilla in the hot tub. Many historically accurate recession predictors are showing red-flags for immenent U.S. economic recession (i.e., Labor Market Conditions Index, Inventory/Sales Ratio, etc.). And this time, the Fed is out of bullets. Crude back to $20's? Also, if Clinton wins, will she outlaw fracking?