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"Marginal" producer who runs the rally of oil prices



This is not only a decline in OPEC production, Venezuelan chaos, as well as sanctions that raise oil prices this year – the United States. Slate production is also slowing down.

And the result is a phenomenal 30% stake in the WTI oil price in the first quarter, with the American benchmark jumping from $ 45 a barrel in early January to $ 60 by the end of March.

These improved supply bases, including deteriorating concerns about global economic growth and rising oil demand, have led to the best quarterly oil output for decades.

A 40 percent drop in prices in the fourth quarter of 2018, according to from

John Laforge, Head of Wells Fargo's Real Estate Investment Strategy Strategy.

Although Saudi Arabia is a producer, managing a market, deliberately holding or increasing production, regardless of price, the United States ̵

1; the world's marginal oil producer – is a country that pumps what the industry calls an additional barrel of oil, therefore, shale breakeven prices are key to definition of global prices

But the growth of oil production in the United States is currently slowing, with the average daily oil production in the US in January decreased in comparison with the previous month for the first time in almost six

And this is in the fields that we must no search

"Prices for raw materials are often set at a margin, which means that they are set by the country that produces that extra barrel of oil, an ounce of gold, or a pound of copper. In the case of US oil, they produce the extra barrel of oil that the world will consume, "LaForche points out. Affiliated: Shale is in deep flood state

"The oil price robot for 2019 is a direct response to the potential for future growth in US production, slowing down," according to Wells. The Fargo Investment Institute, which has $ 65 a barrel at the end of 2019, is a price target for WTI.

Turning to the break-even prices of the world's marginal oil producer, LaForje said:

"The middle of the $ 40 is the moment when the average American shale producer begins to seriously question their future drilling plans – that's what happened at the end 2018

Shale manufacturers tend to agree with this opinion.

According to Q1 Dallas energy research, the leaders of 82 firms E & P, the average breakeven price to profitable drilling, a new well ranges from $ 48 to $ 54 a barrel, depending on the region Drummers need an average of $ 50 a barrel to drill a new well, compared to $ 52 per barrel when asked this year last year. The average breakeven prices in the Midland in Perm were US $ 48, the lowest in the US, and the lowest in the last three years.

"With the recent recovery in oil prices, most firms in the study may profitable to drill a new well at current prices; 78 percent of the responses were at or below the spot price on WTI March 22 ($ 59 a barrel), "the study showed. Related: Aramco Mega-Debt Agreement is a Rapid Success

However, the rally Q1 from $ 45 to $ 60 was significant, therefore, with impatience, higher WTI prices, faster than Everything will lead to additional US oil production in the coming months, setting a stage for more deals on the global market, LaForge said to the Wells Fargo Investment Institute.

"The next short-term oil movement may be down, probably at low to mid-$ 50s. Later, this year, we suspect that the WTI will run at $ 65, because geopolitical tensions are warming up among oil-dependent countries, "he said.

Later this year, oil prices will be due to a combination of many factors. , including, but not limited to, the growth rate of US production. Strengthening US sanctions against Venezuela, the future decision to refuse the United States from Iranian oil buyers, the next OPEC movement, and geopolitical outbreaks such as Algeria and Libya will affect the supply of the oil market. The issues of global economy and trade will determine how stable this year's demand for oil will be.

Author: Tsvetana Paraskov for Oilprice.com

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