Tags: Shale | oil | boom | subside

Analysts: Shale Oil Boom May Subside if Crude Falls Below $80

By    |   Sunday, 12 October 2014 08:17 PM

U.S. crude prices fell to a two-year low Friday, with November futures on the American benchmark, West Texas Intermediate, settling at $85.82 a barrel on the New York Mercantile Exchange, amid concern about sluggish demand and bulging supply.

A continued price decline might blunt the U.S. shale oil production surge, analysts told Fortune. WTI has dropped more than 20 percent from its June peak.

If prices stay below $85 for a few months, companies will start reconsidering next year's drilling plans, the analysts said. And if prices drop below $80, small and mid-sized producers may curb spending and halt some of their operations.

"If it falls below $80, the companies start having the conversation of slowing down their drilling activity," Daniel Katzenberg, an analyst with Robert W. Baird, told Fortune. "It would have to be there for several months for them to actually follow through and reduce drilling plans."

U.S. crude oil output averaged 8.7 million barrels a day last month, the most since July 1986, according to the Energy Information Administration.

Many market participants say oil's price plummet isn't over yet.

"WTI is on track to at least touch $80," Bill O’Grady, chief market strategist at Confluence Investment Management, told Bloomberg.

"The global economy is slowing and that’s going to impact demand. OPEC’s gotten a free ride the last few years because of the low level of Libyan production, but they’re back now."

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U.S. crude prices fell to a two-year low Friday, with November futures on the American benchmark, West Texas Intermediate, settling at $85.82 a barrel on the New York Mercantile Exchange, amid concern about sluggish demand and bulging supply.
Shale, oil, boom, subside
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2014-17-12
Sunday, 12 October 2014 08:17 PM
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