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Page added on November 17, 2016
IEA expects U.S. shale output rise if OPEC pushes oil to $60
U.S. shale oil producers will increase their output if oil prices hit $60 a barrel, meaning OPEC will have to walk a fine line if it curtails production to prop up prices, the head of the International Energy Agency (IEA) said.
OPEC members are due to meet in Vienna at the end of the month to push through the first output limiting deal since 2008.
“If this decision pushes the prices up (to) around $60 dollars, we may well see a significant increase from shale oil from the U.S.,” Fatih Birol told Reuters on Wednesday.
He said this level would be enough for many U.S. shale companies to restart stalled production, although it would take around nine months for the new supply to reach the market.
Low prices have led to two consecutive years of falling investment in upstream oil and gas investments, a pattern Birol expects to continue in 2017.
This, he said, could lead to tighter oil supply and price spikes in the future.
“We are entering a period of greater oil price volatility and the companies, organizations and countries should prepare themselves accordingly,” he said.
(Editing by Alexander Smith)
11 Comments on "IEA expects U.S. shale output rise if OPEC pushes oil to $60"
rockman on Thu, 17th Nov 2016 8:07 am
Same old problem for all oil producers: a higher oil price does not guarantee a higher revenue. It makes little difference to the KSA if it sells for $60 or $45 per bbl if its volume goes down enough to reduce revenue below current levels. After all the reason the KSA ramped up production was to compensate for lower prices caused by decrease demand.
peakyeast on Thu, 17th Nov 2016 9:12 am
@rock: As long as you dont put a value on having bigger reserves later on and the effect of having that.
rockman on Thu, 17th Nov 2016 9:41 am
peaky – Very good point. Some folks have asked in the past why producers (especially US companies) don’t reduce rates and save those reserves for higher future prices. Two reasons. First, the obvious: don’t generate enough revenue and the company fails. Or if a country doesn’t meet budget requirements political instability can arise.
Second, for a pubco the “book value” of future production decreases significantly as one projects further out. IOW the Net Present Value used to determine a pubco’s current value from reserves produced 8+ years in the future has minimal value regardless of higher future oil prices. Making even worse: the SEC regs don’t allow using higher speculative oil prices to calculate the current value of the company. It has to use the SEC price platform for the value of those distant reserves. That price is around $51/bbl right now
Kenz300 on Thu, 17th Nov 2016 2:33 pm
Tar sands in Canada are the high cost producers yet they keep producing. How long can they last? Seems like they are immune to low prices.
Apneaman on Thu, 17th Nov 2016 2:38 pm
Yabut Kenz we was told that it’s “ethical” oil and that’s good enough for me.
rockman on Thu, 17th Nov 2016 4:48 pm
Ken – “Seems like they are immune to low prices.” Developing NEW production is not “immune to low prices”…far from it. Witness proposed projects that have been cancelled. OTOH continuing to produce existing wells that have already had $billions invested in capex and not as nearly affected by lower oil prices. Same reason we haven’t seen production from any of the shale plays “fall off a cliff”.
Northwest Resident on Fri, 18th Nov 2016 1:10 am
The propaganda is so thick you could cut it with a knife. This from Forbes:
“During his campaign Trump vowed to secure U.S. energy independence from “our foes and the oil cartels,” while also creating “complete American energy independence.”
http://www.forbes.com/sites/timdaiss/2016/11/16/no-saudi-oil-says-trump-saudi-arabia-fires-back/#7ea07b3f708b
Conspiracy theory: Knowing full well that the global energy situation is in near term collapse, TPTB engineered Trump’s win and now Trump and Saudi Arabia are speaking their lines, directly from the script, the goal being to set up a built-in excuse when we suddenly find that SA is no longer able to export oil. That time is coming in the near term future, whether we “decide” to not import from SA or not.
The bullshit we are witnessing is at record high levels. Surely this is a sign that the end is near.
Harquebus on Fri, 18th Nov 2016 5:25 am
How long it takes for societies to lose faith in their fiat currency crap is how long they can continue to produce from tar sands.
rockman on Fri, 18th Nov 2016 8:42 am
NR – Would that be TPTB that helped elect President Obama? From the White House:
“President Obama’s All-of-the-Above Energy Strategy is making America more energy independent and supporting jobs. Since the President took office our dependence on foreign oil is at a 40-year low — and declining. America is producing more oil, gas, and renewable energy. These trends are increasing our energy security and enhancing our economic growth.”
Sounds like President Obama was doing his part to “make America great again”. LOL.
Northwest Resident on Fri, 18th Nov 2016 9:50 am
rockman — Most likely. Never forget, the president works for the oil and financial industries, not the other way around, despite attempts to make it appear otherwise. Or so it seems…
rockman on Fri, 18th Nov 2016 2:05 pm
NR – So true. But it’s not as sinister as some imply. The POTUS gets elected by the public regardless how anyone tries to spin it. And the public wants its needs satisfied. And no POTUS can supply the public with anything without revenue. And every penny of that comes from businesses either dfirectly or from personal income taxes on the salaries they provide.
So the bottom line: the POTUS must support business interests or the voters/consumers will vote him out of office. Which is why you’ll never see a Green Party candidate ever receive more then a few % of the vote. And why an R presidential candidate received a record number of votes from union members. Not a majority of those voters but perhaps enough to make the difference.
And if that new R POTUS doesn’t derliver they’ll vote for a different candidate the next time…be it an R or a D.