02-06-2015, 03:19 PM
I'm in the Oil and Gas industry and there is an expectation in the office that the price of Oil will recover this year (although not to $100/bbl).
Currently the production surplus (causing the drop in oil prices) is ~1 million barrels/day (94MB/D supply vs 93MB/D demand) according to the IEA - or about 1%. However the production coming out of existing wells drops an average of 5%/yr (ranges from 4.6%-8.6% depending on source), which means that in order to keep current production, new fields have to be developed. Well, one effect of low oil prices is a short term shelving of new developments and a concentration on completion of those developments in mid-construction. In addition, there is a current average worldwide increase in energy demand of 1%/year.
Also keep in mind that this effort by OPEC to maintain market share, as they are being threatened by the more expensive developments around the world (shale, deep water drilling, oil sands). They are hoping to cause the unconventional developments to shut down (shale fracking is very, very expensive), but as reported by the WSJ, OPEC countries need high oil prices too (although the Saudi's have a huge cash reserve). This is essentially turning into a global game of chicken.
Currently the production surplus (causing the drop in oil prices) is ~1 million barrels/day (94MB/D supply vs 93MB/D demand) according to the IEA - or about 1%. However the production coming out of existing wells drops an average of 5%/yr (ranges from 4.6%-8.6% depending on source), which means that in order to keep current production, new fields have to be developed. Well, one effect of low oil prices is a short term shelving of new developments and a concentration on completion of those developments in mid-construction. In addition, there is a current average worldwide increase in energy demand of 1%/year.
Also keep in mind that this effort by OPEC to maintain market share, as they are being threatened by the more expensive developments around the world (shale, deep water drilling, oil sands). They are hoping to cause the unconventional developments to shut down (shale fracking is very, very expensive), but as reported by the WSJ, OPEC countries need high oil prices too (although the Saudi's have a huge cash reserve). This is essentially turning into a global game of chicken.