Shale Boom Tested as Sub-$90 Oil Threatens U.S. Drillers
By Isaac Arnsdorf Oct 8, 2014 2:18 PM ET
The U.S. shale boom is producing record amounts of new oil as demand weakens, pushing prices down toward levels that threaten to reduce future drilling.
Domestic fields will add an unprecedented 1.1 million barrels a day of output this year and another 963,000 in 2015, raising production to the most since 1970, according to the U.S. Energy Information Administration. The Energy Department’s statistical arm forecasts consumption will shrink 0.2 percent to 18.9 million barrels a day this year, the lowest since 2012.
More supply from hydraulic fracturing and horizontal drilling, and less demand, are contributing to the tumble in West Texas Intermediate crude. The U.S. benchmark is down 19 percent since June 20 and fell below $90 a barrel on Oct. 2 for the first time in 17 months.
“If prices go to $80 or lower, which I think is possible, then we are going to see a reduction in drilling activity,” Ralph Eads, vice chairman and global head of energy investment banking at Jefferies LLC, which advised 38 percent of U.S. energy mergers and acquisitions this year, said in an Oct. 1 interview. “It will be uncharted territory.”
WTI declined to as low as $86.83 a barrel today on the New York Mercantile Exchange, heading for the the lowest close since April 17, 2013. It traded at $87.47 a barrel at 2:01 p.m. in New York. Prices in domestic fields such as North Dakota’s Bakken shale are several dollars lower because transportation bottlenecks raise the cost of reaching refiners.
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http://www.bloomberg.com/news/2014-10-07/shale-boom-tested-as-sub-90-oil-threatens-u-s-drillers.html