Arab Today, arab today us shale girds for tough ride at 40 oil
Last Updated : GMT 02:21:52
Arab Today, arab today
Arab Today, arab today

US shale girds for tough ride at $40 oil

Arab Today, arab today

Arab Today, arab today US shale girds for tough ride at $40 oil

Oil crude
New York - AFP

The drop in US oil prices below $40 a barrel has emboldened talk that lower oil prices will persist longer, leading to much more carnage in the global oil patch.

US benchmark West Texas Intermediate for delivery in October dropped $2.21 to $38.24 a barrel Monday, marking the first close below $40 a barrel since February 2009.

The latest plunge in prices comes as growing worries about a Chinese economic slowdown add to anxiety about excess supply.

"The mood is fairly depressed considering everyone is lowering the forecasts for next year and pushing out the recovery until 2017," said Fred Lawrence, vice president of economics and international affairs at the Independent Petroleum Association of America.

James West, an analyst for the oil services sector at Evercore ISI, said a lengthier downturn would endanger smaller companies that sprouted during the American shale boom. Many have been holding on in the hopes that oil prices will recover to at least $55 or $60 a barrel.

"The boom in the North American market created a lot of new companies that could participate in the shale revolution," West said. "As we take a pause, the fat is being removed."

On Friday, West released a market comment titled "There will be blood" that predicted further activity cuts in the second half of 2015.

Oil prices have been mostly in retreat for the last year, dropping from a peak of more than $100 a barrel in June 2014 to the mid-$40s in March, in part due to decisions by the Organization of the Petroleum Exporting Countries to keep output high despite lower prices.

The latest drop, since early July, roughly coincides with a wave of volatility that hit the Chinese stock market and the July 14 nuclear agreement between Iran and world powers that will lift sanctions on Iran's oil industry in exchange for stricter oversight of Iran's nuclear industry.

On top of worries about Iran and China, oil supply has been increasing at a "breakneck" pace in 2015, thanks in part to "muscular" production from Saudi Arabia and some other OPEC producers, the International Energy Agency said in an August 12 report.

Analysts have also cited seasonal factors at play, with US crude demand typically falling after the end of the key summer driving season.

"Against this backdrop, many participants in the oil industry have adopted a new mantra - 'lower for longer,'" the IEA said. "But how low and how long?"

John Kilduff, founding partner at Again Capital, expects US prices to fall into the mid-$20s. A possible turning point could be a shift in OPEC policy in December if US output falls enough.

The worries about China go "right to the heart of the matter as far as oil and other key commodities -- as far as the key demand country showing some signs of real weakness potentially," he said.

- US output still high -

The impact on the American shale boom has been mixed so far. The US rig count, a closely watched gauge of drilling activity, has fallen by more than 1,000 from a year ago to 885 as of August 21, according to Baker Hughes.

However, US oil production has remained stubbornly high, rising for the first half of 2015 to 9.6 million barrels per day in June, the highest level since the early 1970s.

Output has since begun to ebb, falling to 9.3 million barrels a day as of August 14, according to US Department of Energy data.

Goldman Sachs has endorsed the "lower for longer" view, in part because of the United States.

"This spring's rally in prices did prove to be self-defeating," Goldman said in an August 6 note.

"Not only did all the capital markets reopen as oil prices rose, but producers began to redeploy rigs and remained under-hedged, which is a reflection that the industry simply had not faced enough pain to create real financial stress that would create change."

Turning around the oil market "will take time to achieve," Goldman concluded.

But David Pursell, managing director at Houston energy investment bank Tudor, Pickering, Holt & Co., sees oil prices recovering relatively quickly. His firm predicts oil will be back above $80 a barrel in the second half of 2016.

Pursell said the oil market is "not as oversupplied as people think" and that lower prices will stimulate more demand. He also expects US output to decline more sharply in the months ahead, and "that will get people's attention," he said.

arabstoday
arabstoday

Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today us shale girds for tough ride at 40 oil Arab Today, arab today us shale girds for tough ride at 40 oil

 



Name *

E-mail *

Comment Title*

Comment *

: Characters Left

Mandatory *

Terms of use

Publishing Terms: Not to offend the author, or to persons or sanctities or attacking religions or divine self. And stay away from sectarian and racial incitement and insults.

I agree with the Terms of Use

Security Code*

Arab Today, arab today us shale girds for tough ride at 40 oil Arab Today, arab today us shale girds for tough ride at 40 oil

 



Arab Today, arab today
Arab Today, arab today Youssra depended on colored foam

GMT 16:53 2017 Tuesday ,05 September

Youssra depended on colored foam
Arab Today, arab today Egypt tourism revival steady but slow

GMT 16:04 2017 Tuesday ,19 September

Egypt tourism revival steady but slow
Arab Today, arab today Etiquette expert underlines importance of gifts

GMT 17:52 2017 Sunday ,03 September

Etiquette expert underlines importance of gifts
Arab Today, arab today 600,000 children may flee to Bangladesh

GMT 06:49 2017 Monday ,18 September

600,000 children may flee to Bangladesh
Arab Today, arab today Equifax executives step down

GMT 16:16 2017 Saturday ,16 September

Equifax executives step down
Arab Today, arab today
Arab Today, arab today
Arab Today, arab today Ministry seeks to improve education

GMT 14:49 2017 Sunday ,17 September

Ministry seeks to improve education
Arab Today, arab today New Zealand opposition looks

GMT 10:35 2017 Thursday ,14 September

New Zealand opposition looks
Arab Today, arab today 5,000 'Dieselgate' deaths in Europe per year

GMT 19:18 2017 Monday ,18 September

5,000 'Dieselgate' deaths in Europe per year
Arab Today, arab today The history of solar eclipses

GMT 05:16 2017 Sunday ,20 August

The history of solar eclipses
Arab Today, arab today Five trends at the Frankfurt auto show

GMT 12:04 2017 Monday ,18 September

Five trends at the Frankfurt auto show
Arab Today, arab today Renault-Nissan to launch

GMT 10:44 2017 Saturday ,16 September

Renault-Nissan to launch
Arab Today, arab today Eman Al Assy receives three offers

GMT 06:31 2017 Saturday ,16 September

Eman Al Assy receives three offers
Arab Today, arab today 'Severe' Typhoon Doksuri pounds Vietnam

GMT 15:49 2017 Friday ,15 September

'Severe' Typhoon Doksuri pounds Vietnam

GMT 11:10 2017 Friday ,15 September

Fadl Shaker retreats from surrendering himself

GMT 05:05 2017 Tuesday ,12 September

Pregnant woman's suicide roils China

GMT 16:53 2017 Saturday ,02 September

Mai importance of gifts during Eid Al-Adha

GMT 10:25 2017 Thursday ,14 September

Greece fumbled oil spill response

GMT 10:46 2017 Saturday ,05 August

Nanis reveals simple ideas for home renovation

GMT 04:45 2017 Sunday ,17 September

France's hurricane-hit St Martin

GMT 21:57 2017 Sunday ,17 September

Russia and Iraq restore air travel

GMT 17:12 2017 Monday ,07 August

Al-Shawaifi reveals secrets of total solar eclipse

GMT 12:56 2017 Friday ,15 September

Apple's grand plan in Ireland held up by a forest

GMT 11:37 2017 Saturday ,12 August

Fashion designer reveals her new collection
Arab Today, arab today
Arab Today, arab today
 
 Arab Today Facebook,arab today facebook  Arab Today Twitter,arab today twitter Arab Today Rss,arab today rss  Arab Today Youtube,arab today youtube  Arab Today Youtube,arab today youtube
arabstoday arabstoday arabstoday arabstoday
arabstoday arabstoday arabstoday
arabstoday
بناية النخيل - رأس النبع _ خلف السفارة الفرنسية _بيروت - لبنان
arabstoday, Arabstoday, Arabstoday