The United States monitors the shale oil market in response to crises in the industry. The analytical company SPA (Shale Profile Analytics) notes that at the moment the situation does not inspire optimism among producers of shale hydrocarbons. It is expected that if the situation on the world oil market does not undergo changes in terms of raising prices to at least $ 45 per barrel, shale oil production will be reduced almost threefold. A preliminary estimate is a reduction to 4,5 million barrels per day.
It is added that a significant reduction in oil production for the United States has nothing to do with the OPEC + deal. In fact, the fact is revealed that Washington, agreeing to reduce within the framework of the mentioned OPEC +, in fact, initially understood that American companies would have to go for a significant reduction in oil production. Hence the “wide gesture” from Trump in the form of statements of readiness to “divide the volume of reduction with Mexico, taking over the bulk of such volumes.” It must be recalled that Mexico is one of those countries that was not eager to take the path of reducing oil production.
That is, the United States understood that a wave of crisis was coming in, it would have to go to reduce production, and therefore they played a performance in which they "persuaded other market participants to support the reduction initiative." They are cutting it themselves, certainly not because of the desire to join OPEC +, but corny because it is already impossible not to cut it.
SPA experts:
This (a three-fold reduction in oil production by shale oil) will dramatically undermine US influence on world energy markets and will seriously affect President Trump’s ability to use oil as a kind of geopolitical weapons.
To date, the bulk of the production of shale oil falls on those wells that have begun work in the past 14 months. It is about 55 percent of the US market. American shales have to give up drilling new wells.
As Military Review reported the previous day, in the United States, companies with a capitalization of less than $ 300 million engaged in the production of shale oil are removed from the list of companies for which credit ratings are compiled. This suggests that rating agencies have already ceased to consider them as production structures that can independently cope with the payment of accumulated debts. In turn, the cessation of publication of credit ratings and their future drafting cancels the plans of shale companies with the mentioned capitalization parameters (which is about half of the entire shale market in the USA) for attracting investments. An investor simply will not invest in oil production if he does not have data on his solvency on loans, as well as on what successes he intends to achieve in developing the field.
As the representatives of the shale industry themselves say, the situation at the moment is similar to that in which a bottle of champagne was prettyly shaken, and the cork began to slowly come out of the neck. It is no longer possible to return the cork. So you have to wait for the contents of the bottle to pour out.
It would seem, in this case - “substitute glasses and consume”. But the analogy with a bottle of champagne does not quite correspond to reality. The oil market is oversaturated, and few people are going to “consume” it, as they say, here and now. Therefore, many shale companies are producing as if by inertia - so as not to spend money on well conservation. And for a number of shale hydrocarbon wells that are operated in the USA, the concept of “conservation” is not suitable because of problems with rock stability. In the case of conservation, oil will begin to seep through the pores that have formed and are increasing due to high pressure inside the reservoir.
There is only one way out for the shale industry - to rely on the support of the state against the backdrop of hopes regarding rising prices.
And what about the prices?
They are marking around $ 35 a barrel. This is the brand name Brent. Prices have stabilized. For "non-shale workers" this (stabilization of oil prices) is a positive point. But for shale companies, there is nothing positive about this for the simple reason that the price has stabilized, to put it mildly, not quite at the point that will allow them to get a plus.