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Opinion: The Current Oil Price Rally Is Reaching Its Limits

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Oil prices have climbed by about 50 percent from their February lows, topping $40 per barrel. But the rally could be reaching its limits, at least temporarily, as persistent oversupply and the prospect of new shale production caps any potential price increase. That has sparked a renewed sense of optimism among oil traders.

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The 5 Countries That Could Push Oil Prices Up

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Oil prices appear to be stuck in the $50s per barrel, but that doesn’t mean there aren’t serious supply risks to the market. An unexpected disruption could occur at any moment, as has happened in the past, leading to a sudden and sharp jump in prices. by Nick Cunningham for Oilprice.com.

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Oil Well Strippers Suffering From Low Oil Prices

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With OPEC breaking down and any kind of coordination among its members on price cuts looking increasingly unlikely, it now appears that oil prices could remain below $50 a barrel for a year or more. Stripper-operated wells account for all of the oil production in the state of Illinois, for instance.

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IEA: Global oil discoveries and new projects fell to historic lows in 2016 while US shale surged; “two-speed” market

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Global oil discoveries fell to a record low in 2016 as companies continued to cut spending and conventional oil projects sanctioned were at the lowest level in more than 70 years, according to the International Energy Agency, which warned that both trends could continue this year. Oil discoveries declined to 2.4

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Huge Backlog Could Trigger New Wave Of Shale Oil

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That figure is also up sharply from the 5,271 from the same month in 2016, a 60 percent increase. Some level of DUCs is normal, but the ballooning number of uncompleted wells has repeatedly fueled speculation that a sudden rush of new supply might come if companies shift those wells into production.

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Supply Crunch Or Oil Glut: Investment Banks Can’t Agree

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This year, shale output forecasts combine with OPEC’s production cuts, geopolitical factors, and unexpected outages to further complicate supply/demand and oil price forecasts by Wall Street’s major investment banks. According to the IEA, supply could lag demand in a few years, which could lead to a surge in oil prices. “

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US Shale Is Now Cash Flow Neutral

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Oil prices are probably already high enough to spark a rebound in shale production. The IEA says that in the third quarter of 2016, the US shale industry became cash flow neutral for the first time ever. Even when US oil production hit a peak at 9.7 by Nick Cunningham of Oilprice.com. That isn’t a typo.