Oil took a major dip this week as fears of a global oversupply resurfaced, despite petrostate production cuts. The FT reports:
The falls came after oil prices fell the most in more than a year over the previous session when US crude inventories climbed for a ninth straight week to a record high. […]
Wednesday’s decline came after the Energy Information Administration said inventories of US crude stocks had climbed by 8.2m barrels, far more than analysts expected, as refinery purchases declined…“If things stay unchanged, then this week will be the worst week for oil prices since the Opec deal,” said Olivier Jakob of Petromatrix, a Swiss-based consultancy.
OPEC and the 11 other petrostates the cartel managed to lasso in to its output cut will be looking at the oil market with dismay this week. Those cuts were meant to help eat away at the crude glut that led to the price collapse nearly three years ago, but they’ve only lifted those prices by about $10 per barrel. This week, much of that work has been undone by skittish traders, nervous about swelling American crude inventories.
There’s good reason for concern. Since October, the United States has added more than 500,000 barrels per day (bpd) to our overall production, and we’re once again producing more than 9 million bpd for the first time in nearly a year. American shale producers are taking advantage of the small bump in prices, and they’re also capitalizing on efficiency gains and falling industry costs, all in service of increasing crude output.
Fracking firms aren’t just returning to wells they abandoned during the bearish market, though. Some are seeking new areas of exploration, including a geologist intent on bringing fracking to Alaska. Bloomberg reports:
Paul Basinski, the geologist who helped discover the Eagle Ford basin in Texas, is part of a fledgling effort on Alaska’s North Slope to emulate the shale boom that reinvigorated production in the rest of the U.S. His venture, Project Icewine, has gained rights to 700,000 acres inside the Arctic Circle and says they could hold 3.6 billion barrels of oil, rivaling the legendary Eagle Ford. […]
“The oil is there,” said Basinski, founder and chief executive officer at Houston-based Burgundy Xploration LLC, in an interview. “Now it’s a question of how quickly we can get it to flow and whether we can get the economics to work.” One exploratory well has been drilled, he said, and a second is planned by mid year.
We’re so far past “peak oil” that you’d have to squint to see it in the rear view mirror. New technologies and techniques are unlocking reserves of oil that were previously thought to be impossible to access while turning a profit. That spirit of innovation is what OPEC and its ilk are up against with their production cuts, and for the moment it looks like these new American pioneers are winning.