Christmas Cheer To the US Shale Oil Industry
Why is the price of oil collapsing a few days before Christmas?
Because the US shale oil industry can't keep its credit cards in its purse and is set to spend $124 billion more dollars to keep growing production in 2019. We're oversupplied now and the world's oil speculators are obviously nervous about more supply, as should anyone be nervous in the worldwide oil business, even the US shale oil business itself.
Where is that money going to come from in 2019? In September of 2018, when the price of oil was $70, Haynes and Boone said only 21% would come from self generated cash flow:
Now the price of oil is below $50 and the Permian Basin is getting less than $40 per barrel at the well head, with no place to take their associated gas; the Bakken is getting less than $30 a barrel. It won't change a thing and these shale oil yahoos will go wide open, on more borrowed money. OPEC + says it will remove 1.2MM BOPD from the world oil market to raise prices, the EIA says the US shale oil phenomena will put 1.2MM BOPD right back on the world oil market by YE 2019. Giddy up !!
So, on behalf of all of the rest of us in the domestic oil industry in America, onshore and off, those of us NOT losing our asses drilling lousy shale oil wells, and not up to our hard hats in debt, and also on behalf of whatever shareholders might be left in the US dumb enough to still own stock in shale oil E&P's... the Fed has a gift for you tomorrow, I hope, but here is our best wishes for the holiday season: