OPEC and its leading member Saudi Arabia`s attempts to stabilize the oil price could have some effect, as ailing countries including Venezuela fear the oil price falling to as low as $20 per barrel. While the OPEC meeting is expected to act to stabilize production, both Saudi Arabia and Russia have announced upcoming oil discounts as they expect to raise market share.
"The market is quite skeptical that any resolve will occur between OPEC and non-OPEC producers," Andy Lipow of Lipow Oil Associates told Reuters.
The US Energy Information Administration, despite noting high volatility, predicted that the Brent crude benchmark would average $56 throughout the year. Volatility in the markets has shown bets as high as $96 per barrel for the slightly cheaper West Texas Intermediate benchmark. In its "crystal ball" predictions, Fortune Magazine made a prediction of around $55.
Concentrated Shale
While the US oil rig count has fallen by two thirds in the past year, from a historic high of 1,609 in October 2014 to 564 on November 20, shale oil basins have been the hardest-hit.
The Williston basin, home to the Bakken Formation where fracking billionaire Harold Hamm saw 129 of its 192 rigs shut down in the past year.
The fall in oil prices already sent some shale companies into bankruptcy, although larger companies, such as Hamm`s Continental Resources have been able to break even after a loss in the first quarter of 2015.
The decline has sent US oil companies rushing for West Texas` Permian basin, which is one of the most oil-rich regions in the world and allows oil companies still in the market to retain their positions.
"It’s the last oil basin standing. It’s still the last place you can put together a material position. It’s the last place you can drill in this environment and make money," Will Giraud of Concho Resources Inc. said, as cited by Bloomberg.
Concentrating capital in the area could mean that another shale boom, although this time confined to West Texas. It is unclear if this would mean that the production would branch out across the US again, although another price bust could devastate the already-bruised shale oil industry.
More about:
