Oil Price Crash

CME NYMEX crude oil prices were down again yesterday – with the West Texas Intermediate (WTI) contract closing at $46.39 down $2.30 over the holiday weekend and over 55% lower than its high 7 months ago in June 2014. Some are billing the free fall in crude prices as a showdown between U.S. shale producers and OPEC. That is because OPEC has apparently decided not to cut production to prop up prices in an over supplied market in hopes that lower prices would squeeze out U.S. shale producers. If that was the strategy then it isn’t working so far. Today we review crude producer plans for 2015 and find lower capital expenditure budgets and cuts in rig deployment contrast with expanded production.

Producer pioneers in the Tuscaloosa Marine Shale (TMS) are finally figuring out how best to wring large volumes of Light Louisiana Crude from the oil-rich play’s notoriously complex geology. But are they “cracking the code” at just the wrong time, when crude prices are crashing and investors are shifting their focus to shale-play sweet spots with low drilling costs? Some say no; that fine-tuned completion formulas, declining drilling costs and a favorable tax environment make the TMS a “go”, even in these tough times. But others say yes; that it’s time to move on from the TMS, at least for now. Today we revisit the still-promising TMS in central Louisiana and southwestern Mississippi, and assesses whether the play many consider to be the next big thing needs to wait for higher oil prices to shine.