Producers in the Eagle Ford shale and nationwide most likely had an extra bounce in their step late Tuesday morning as the market value for Brent crude oil reached $56 per barrel. Additionally, West Texas Intermediate finally rose above $50 at $51 per barrel Tuesday. But even with the upswing, it’s too early to call whether this is a permanent turnaround or just a momentary trend.
San Antonio Business journal reported that most market analysts are attributing the price increase to declining rig count numbers in the United States, which some say suggests that producers might be preparing to cut their output. That diminished output would help reduce the global glut in the energy market.
Thomas Tunstall, research director for the Institute for Economic Development at the University of Texas at San Antonio, claimed that many thought the price of oil would have gone even lower before bouncing back up. Tunstall said what happens next for global oil prices also depends on several factors. This includes demand rates of the ever-growing Chinese economy and also production rates of Saudi Arabia and other major OPEC countries.
In related news, Rig counts down, Eagle Ford Shale completions up.
Nonetheless, according to research by senior economist Javier Oyakawa at UTSA’s Institute for Economic Development, in a price reality, prices must stabilize in the $60 per barrel range through 2023 to support 55,328 jobs and more than $37 billion in economic output in the Eagle Ford.
There are conflicting views coming from the top spots in the energy industry. Just today, BP Plc CEO Bob Dudley felt there is no point in holding out for a surge in oil prices. He compared today’s market to that of 1986, when oil fell from $30 to $10 per barrel and didn’t return until Iraq invaded Kuwait in 1990.
“The fundamental supply and demand does remind me of 1986 a bit, where we could go into a period in this decade of lower oil prices,” Dudley stated in a recent Bloomberg publication. He added that prices may remain below $60 for up to three years. “It will be a long time before we see $100 again”
The well-established oil man and Continental Resources CEO Harold Hamm recently made remarks that oil could rebound faster than any expect. He believes oil production from the country’s biggest shale plays–such as the Bakken, Permian and the Eagle Ford—could begin to start decreasing mid-year or even sooner. This reduction would most likely translate to increased crude oil prices globally. However, even Hamm admitted to his uncertainty of a bottom for prices. He believes oil will remain less than $100 per barrel for some time.