Energy experts believe if crude oil prices stay above $50 per barrel for long enough, American oil companies could make a huge comeback while OPEC countries continue to squabble over production freezes.
A CNBC survey of oil industry experts “found that most U.S. shale drilling is expected to return when oil rises to $60 or above” and 40 percent of respondents “expected most production to return when prices reach $50 to $60.”
Forty-five percent said oil needed to be above $60 a barrel for a production boom, according to CNBC’s survey, but most experts agreed it’s very unlikely OPEC member states will agree to freeze oil production this week.
CNBC reported “73 percent of the strategists, traders and analysts found 10 percent or less chance that OPEC would come to an agreement on freezing production this week.” OPEC members and Russia failed to agree to production cuts in April.
But Russia and Saudi Arabia, OPEC’s largest member, may not have to wait too long before oil prices rebound slightly from a low of about $30 per barrel earlier this year. Now, crude sells for about $50 per barrel.
Crude oil prices plummeted in mid-2014 as supplies from U.S. hydraulic fracturing, or fracking, put more oil on the market at a time when demand was slowing due to economic troubles in China. OPEC’s decision not to cut production that year sent prices plummeting even further.
The upside to the crude collapse was gasoline became way cheaper, but the downside is oil producers had to lay off workers and shut-in higher cost oil wells. But as oil prices increase, those wells can be turned back on.
OPEC countries have been hit even worse than U.S. oil companies, since many of them need oil prices to be much higher to fund their vast welfare states.
The International Monetary Fund reported in April that Middle Eastern countries lost nearly $400 billion in oil revenues in 2015 because of lower oil prices.
Saudi Arabia is one of those countries, and the Kingdom has been taking drastic actions to wean its people off welfare and reduce their reliance on oil exports for cash and power.
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