America’s New Role in Global Oil Markets Is Being ‘Put to the Test’
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The shale revolution helped drive oil prices down to levels not seen in over a decade.
Now, some analysts are wondering whether U.S. producers will be able to cap the rally in West Texas Intermediate crude oil futures, which have flirted with $50 per barrel in recent sessions ahead of Thursday’s OPEC meeting in Vienna.
And now it’s time to see whether the best cure for higher oil prices is in thousands of drilled but uncompleted wells, according to a team led by Citigroup Inc. Global Head of Commodities Research Ed Morse.
Part of the game-changing nature of shale is the extent to which lead times are shortened, as producers are able to ramp up output relatively quickly in the event that oil prices rise. The fracklog further accentuates the responsiveness of energy companies to a recovery in crude.
Bloomberg Intelligence Analyst William Foiles, however, cautioned that shale companies might not be able to increase output too expeditiously. Job cuts in the oilfield services sector have made producers less nimble, he said.
“It’s like a stop light turning green—if everyone were to release their break all at the same time, they would move faster,” explained Foiles. “But you don’t know that people will, so the person in front (in this case, oil prices) has to release its brake first before then the second car (exploration and production firms) can release its brake and choose to increase completions before the next car (oilfield services companies) can release its brake and finish the wells to get production moving.”
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