Note on the Current Global Oil Market
Saudi Arabia Oil Minister U.S. Oil Production E nergy prices could go up at the same time that energy production could continue to decrease, although not as much as simple supply/demand forecasts would expect (see prior post). Crude oil prices would have to rise from current $35/barrel level to at least $50/barrel to stabilize production and over $60/barrel to start increasing production. Similar percent increases would be needed for natural gas. For most shale oil and natural gas producers, virtually all operating revenue is now going to debt payments. After hedges come off, the number of bankruptcies and “distressed debt” will accelerate in second quarter of 2016. The companies can continue production but bondholders, lenders and stockholders will suffer even larger losses. This trend has already started in the junk bond market and the fall of public oil companies’ stock prices. Why Saudi Arabia Misjudged U.S. Oil Production ...