The U.S. shale boom is back and better than ever. After weathering a collapse in crude prices that saw the value of a barrel of oil drop from more than $110 in June 2014 down below $30 in January 2016, American fracking firms (the ones that survived, that is) are looking fit once again. As Bloomberg reports, these companies are already taking advantage of a petrostate production cut that ceded valuable market share and pushed oil prices back above $50 per barrel:
While more than 100 have gone bankrupt since the start of 2015, the companies that survived have reshaped themselves into fitter, leaner and faster versions that can thrive with oil at $50 a barrel. Now, it’s OPEC that’s seeking solutions, desperate to drive prices up even further in a push to repair the economies of the countries it serves.
“The shale business is rejuvenated because of the difficulties it has been through,” Ben van Beurden, the chief executive officer of Royal Dutch Shell Plc., said in comments last month.
After peaking at more than 9.6 million barrels per day (bpd) in June 2015, U.S. oil production fell by nearly 1.2 million bpd as suppliers struggled to cope with rapidly shrinking profit margins. Before the bearish market, shale operations were some of the most expensive oil production processes in the world, but those trying times helped the fledgling industry trim the fat and find news ways to stay in the black while drilling that black gold. Bloomberg has more:
The number of U.S. drilling rigs has grown 91 percent to 602 in just over nine months. Meanwhile, production has gained more than 550,000 barrels a day since the summer, rising above 9 million barrels a day for the first time since April.
So now, nearly three years after a global glut sent oil prices into a tailspin and American oil producers to their nearest lenders, U.S. oil production is once again floating above 9 million bpd. And as positive as this is for both the American economy and our country’s energy security, it’s a major threat to oil-soaked states both inside and out of OPEC. Those petrostates banded together late last year to finally agree on a production cut, and they managed to induce a price rebound of roughly $10 per barrel as a result. Now, however, their worst fears are being realized: U.S. shale producers are seizing the opportunity and bringing rigs out of retirement.