Relief Arrives For US Shale Firms As OPEC Folds In Price Battle
HOUSTON, Sept 29 (Reuters) - It was a moment U.S. shale oil producers have been waiting on for more than two years: OPEC nations finally agreed to cut production on Wednesday in a move that lifted low prices ravaging their budgets.
Two sources in the Organization of the Petroleum Exporting Countries said the group would reduce output to 32.5 million barrels per day (bpd) from current production of 33.24 million bpd, by around half the amount of global oversupply.
The agreement effectively establishes a floor on prices near $50 a barrel - around where many U.S. shale oil companies can make money and drill new wells. The floor is twice as high as where oil languished in the depths of the downturn.
"This gives U.S. producers more confidence," said James West, partner at the investment firm Evercore ISI in New York. "They may become a touch more aggressive than they had planned to be."
U.S. benchmark crude rose more than 5 percent to $47 a barrel on the news, pending final details about the cut, which won't be known until after another OPEC meeting in November.
One U.S. shale oil industry veteran likened the results of the prolonged price war to a bruising 12-round boxing match that ended in a technical draw.
After OPEC in mid-2014 let oil prices fall as it sought to regain market share, dozens of small and high-cost U.S. producers fell into bankruptcy.
Meanwhile, budgets of OPEC members from Venezuela to Angola shrank on a 60 percent slide in crude prices. And two days before the deal was announced, Saudi Arabia cut ministers' salaries by 20 percent and scaled back financial perks for public sector employees.
But in the United States the big shale companies - the ones responsible for the bulk of all new onshore domestic crude output - survived. They confounded OPEC by cutting costs and finding new ways to squeeze more oil from rock.
The likes of Anadarko Petroleum Corp, EOG Resources Inc, Apache Corp and more than 25 other companies showed they can weather oil at $40 a barrel and profitably drill new wells as oil ticks toward $60 a barrel.
Many U.S. shale companies, eyeing a rebound, even added acreage this year during a $12 billion land grab in the oil-rich Permian Basin of West Texas.
At least 32 companies raised a record $20.40 billion in equity markets in the first eight months of this year, with half of them doing so to buy oily land.
In July, Pioneer Natural Resources Chief Executive Scott Sheffield said overhauled shale companies were now cost competitive with Saudi Arabia.
The shale revolution, which fracks rock to coax oil from it, lifted U.S. oil production from 4.9 million bpd in 2009 to a peak of 9.6 mln bpd in June 2015.
12
View Full Article
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Weatherford CEO's Rebound Plan Relies On Getting Smaller
- Iran Says Oil Market Is Too Tight For US Zero Exports Target
- China's Squeezed 'Teapots' Eye Petchem Path To Riches
- Baker Hughes: US Drillers Add Oil Rigs For Second Week In Three
- Venezuela Hands China More Oil Presence, But No Mention Of New Funds
- Gunvor CEO Sees Russian Refining Capacity Taking Hit from Drone Strikes
- These Factors Helped Brent Oil Price Break Above $85
- Sinopec Engineering Posts Higher Annual Petrochemicals Revenue
- Imperial Pipeline in Winnipeg Goes Offline for Three Months
- Gaz System to Acquire Gas Storage Poland
- Subsea7 Secures Contract to Service Woodside's Trion
- Adnoc Inks Supply Deal for Ruwais LNG Project with Germany's SEFE
- EIA Boosts USA Crude Oil Production Forecasts
- TotalEnergies to Acquire TLCS Eyeing Bayou Bend CCS Project
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- EIA Drops 2024 Henry Hub Gas Price Forecast
- EIA and Standard Chartered Offer Up Latest Oil Price Predictions
- Red Sea Region Sees Another Watershed Incident
- Chevron Oil Project in Kazakhstan to Cost $48.5B
- OPEC Voices Encouragement after IEA Affirms Support for Oil Security
- Biden Govt Bares Strategy for Freight Charging, Hydrogen Fueling Infra
- Rystad Looks at the Buzz Around White Hydrogen
- Ukraine Hits Third Russian Refinery In Escalating Drone Strikes
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Is Peak Oil Demand Close?
- Vessel Sinks in Red Sea After Missile Strike
- JP Morgan, Standard Chartered Reveal Latest Oil Price Forecasts
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Rystad Forecasts Net Production of Top Permian Producers in 2024
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension