Illegal Dumping Sucks
I'm reporting it.
The American shale oil industry is whining about Russia and OPEC "dumping" crude oil on the world market below its extraction costs, calling it blatantly unfair. The Independent Petroleum Association of America (IPAA), much like the API, represents the largest independent oil producers in America and many major integrated companies. The IPAA testified before the Texas Railroad Commission against proration, but is now begging the Federal government for financial aid to be given to its membership. Both the IPAA and the API are also asking Trump for protectionist tariffs on KSA and RU imports to stop illegal dumping.
Here is a recent chart from Rystad Energy showing that only 10% of its top 40 shale oil producers earned any free cash flow in 2019...this at an average price of $63 per barrel for the year. That implies to me that the US shale oil industry has been dumping LOTS of oil on the market below its extraction costs...and its doing all that on a Mastercard.
This leveraged oversupply of light tight oil is now helping to destroy the entire rest of the domestic oil and gas industry in America, including the Gulf of Mexico. Thousands of small to medium operators all across America have been pushed out of the market by the US shale oil sector dumping its product, far below costs. We're shutting in, the shale oil industry is still producing and even drilling wells at below $13 per barrel and on the express elevator down. How utterly stupid is that? It is an economic "waste" of America's last remaining oil and gas resources.
"The first taps to be turned off will likely be the 1.75 million barrels a day from older, conventional U.S. wells that produce just a few dozen barrels a day each, according to IHS Markit’s LeBlanc."
Nap time at the dump.