On an oil related note benchmark U.S. light crude (CLN2) is testing the technically significant $90.00 mark in trading today.
Since declining from above $100 barrel the price appears to have achieved technical support at $90 +/-.
Estimates of economic costs for shale oil extraction vary substantially and I have yet to see reliable figures. I have also seen cost estimates of the price of transportation per barrel in the $15/barrel range for rail and $6-$7/barrel for pipeline transit. Some of this differential has been used to explain the price spread between Brent crude, West Texas Intermediate (~-$15 relative to Brent) and North Dakota Light Sweet (as much as ~-$25 relative to Brent). We will know what the real economic price of shale oil is when/if the wells get shutdown, as of right now there's no sign of that yet whatsoever despite a very clear "bearish" picture for crude prices in the medium term.
On another related note the recently released
monthly report for the Oil and Gas Division of the North Dakota Department of Mineral Resources indicates a new all time record high active rig count of 214 and a new all time high of 575,490 barrels per day of production in March. We are now in May and it seems likely ND is probably above 600,000 barrels per day at this point.
This
article from last week on CNBC probably gives as good a description of the displacement on the global oil markets caused by increases in U.S. oil production of any I have read yet to date.
LONDON, May 22 (Reuters) - Europe is facing a glut of high quality crude oil grades, only a year after war in Libya created a serious shortage, as the continent's demand falls and the United States cuts imports due to greater availability of domestic supply.
This has led to a steep weakening in values for many high quality sweet and low-sulphur grades in a rare market development potentially suggesting oil futures prices have scope to correct yet lower in a very oversupplied market.
I am curious to see whether or not continued declines in the price of oil affect production in North Dakota and hence the potential for development of this new line of business for PAR.