Released March 29, 2024 | SUGAR LAND
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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Triple-digit crude oil prices could be on the horizon according to big investment firms, though a survey from the Federal Reserve Bank of Dallas paints something of a bearish picture for the year.
West Texas Intermediate (WTI), the U.S. benchmark for the price of oil, has been on a slow but steady rise for much of the month, climbing 5.52% since the start of March to reach the low-$80 per barrel range.
Federal data show WTI averaged $77.58 per barrel last year. A survey of executives from 145 oil and gas companies taken between March 13 and March 21 showed expectations of $80 per barrel for the U.S. benchmark on average this year.
Answers varied, from a high-water mark of $120 to a low of $70 per barrel. The spot price for WTI during the survey period averaged $82.52 per barrel.
That's decidedly low when compared to the sentiment from big investment banks. JPMorgan Chase said Brent crude oil, the global benchmark, could average $90 next month and move closer to $100 per barrel by the end of the third quarter.
Brent on Thursday was trading at a $4 per barrel premium to WTI, putting the $90 forecast within reach.
But regardless of the disparity in outlooks between the Dallas Fed survey and big investments, prices remain supportive for shale producers. Asked what WTI price is necessary to cover operations at existing wells, the survey showed an average of $39 per barrel.
"Almost all respondents can cover operating expenses for existing wells at current prices," the Fed stated.
Across the board, survey respondents said they needed an average price of $64 per barrel to profitably drill a new well, some $2 per barrel higher than last year's expectations. The break-even price in the lucrative Permian basin was $4 higher than last year at $65 per barrel.
Those price projections should cover production trends for the year. While the pace of increase is slowing, U.S. shale oil production continues to chart new highs. The federal government expects total shale oil production to average 9.8 million barrels per day (BBL/d) in April, a 16.5% increase from the same month in 2019.
Prices so far this year have been supported by export issues from the likes of Sudan, Venezuela and Iraq, the latter of which has yet to resolve ongoing export issues with the semiautonomous Kurdish government in the north.
Meanwhile, the various conflicts in the Middle East have yet to impact actual supplies, though the geopolitical risk is real.
"The volatility in geopolitical risk is more concerning than a year ago," one respondent to the Dallas Fed's survey said.
In Eastern Europe, Ukrainian drone strikes have increasingly targeted Russian energy infrastructure. RBC Capital Markets counts five refineries in Russia that are experiencing disruptions, with about 13% of the total capacity impacted.
"We continue to contend that Ukraine seemingly has the capability to target the majority of export facilities in western Russia, which would put (around) 60% of Russia's crude exports at risk," wrote Helima Croft, the head of global commodity strategy at RBC. "While Washington would certainly not be happy with such a move because of the serious price implications, Kyiv could decide that such asymmetrical measures may be necessary."
In an election year, and with U.S. inflation still above preferred levels, Croft said incumbent President Joe Biden may turn again to the Strategic Petroleum Reserve (SPR) to alleviate any potential consumer pain.
"(I)f President Biden cannot find a way to ameliorate the risk from these conflicts, the White House may decide that SPR releases are more politically palatable than retail gasoline prices north of $4 per gallon for the summer driving season," Croft added.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
West Texas Intermediate (WTI), the U.S. benchmark for the price of oil, has been on a slow but steady rise for much of the month, climbing 5.52% since the start of March to reach the low-$80 per barrel range.
Federal data show WTI averaged $77.58 per barrel last year. A survey of executives from 145 oil and gas companies taken between March 13 and March 21 showed expectations of $80 per barrel for the U.S. benchmark on average this year.
Answers varied, from a high-water mark of $120 to a low of $70 per barrel. The spot price for WTI during the survey period averaged $82.52 per barrel.
That's decidedly low when compared to the sentiment from big investment banks. JPMorgan Chase said Brent crude oil, the global benchmark, could average $90 next month and move closer to $100 per barrel by the end of the third quarter.
Brent on Thursday was trading at a $4 per barrel premium to WTI, putting the $90 forecast within reach.
But regardless of the disparity in outlooks between the Dallas Fed survey and big investments, prices remain supportive for shale producers. Asked what WTI price is necessary to cover operations at existing wells, the survey showed an average of $39 per barrel.
"Almost all respondents can cover operating expenses for existing wells at current prices," the Fed stated.
Across the board, survey respondents said they needed an average price of $64 per barrel to profitably drill a new well, some $2 per barrel higher than last year's expectations. The break-even price in the lucrative Permian basin was $4 higher than last year at $65 per barrel.
Those price projections should cover production trends for the year. While the pace of increase is slowing, U.S. shale oil production continues to chart new highs. The federal government expects total shale oil production to average 9.8 million barrels per day (BBL/d) in April, a 16.5% increase from the same month in 2019.
Prices so far this year have been supported by export issues from the likes of Sudan, Venezuela and Iraq, the latter of which has yet to resolve ongoing export issues with the semiautonomous Kurdish government in the north.
Meanwhile, the various conflicts in the Middle East have yet to impact actual supplies, though the geopolitical risk is real.
"The volatility in geopolitical risk is more concerning than a year ago," one respondent to the Dallas Fed's survey said.
In Eastern Europe, Ukrainian drone strikes have increasingly targeted Russian energy infrastructure. RBC Capital Markets counts five refineries in Russia that are experiencing disruptions, with about 13% of the total capacity impacted.
"We continue to contend that Ukraine seemingly has the capability to target the majority of export facilities in western Russia, which would put (around) 60% of Russia's crude exports at risk," wrote Helima Croft, the head of global commodity strategy at RBC. "While Washington would certainly not be happy with such a move because of the serious price implications, Kyiv could decide that such asymmetrical measures may be necessary."
In an election year, and with U.S. inflation still above preferred levels, Croft said incumbent President Joe Biden may turn again to the Strategic Petroleum Reserve (SPR) to alleviate any potential consumer pain.
"(I)f President Biden cannot find a way to ameliorate the risk from these conflicts, the White House may decide that SPR releases are more politically palatable than retail gasoline prices north of $4 per gallon for the summer driving season," Croft added.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
