juarezbear;842447865 said:
I believe the sweet spot for oil is roughly $65/barrel. That's high enough to support domestic production costs and low enough to keep the Saudis pumping.
The WSJ would seem to agree with Jaurez:
Oil prices would need to fall at least another $20 a barrel to choke off the U.S. energy boom, industry experts say, though some smaller American producers would face serious problems from a more modest decline.
Small and midsize companiesnot global giantsare behind the surge in U.S. oil output, which hit 8.97 million barrels a day earlier this month, according to federal statistics. Some of these drillers have taken on a lot of debt, which was easier to justify when oil was going for as much as $107 a barrel just four months ago.
U.S. crude closed Wednesday at $82.20 a barrel, and far less in some parts of the country where few pipelines are available to move it to refineries. Lower oil prices mean drillers will have less cash to cover their borrowings, especially if crude prices tumble more.
So far, American companies haven't reacted to the recent oil-price drop: The number of drilling rigs searching for onshore oil in the U.S. has risen slightly since oil prices peaked June 20.
The Organization of the Petroleum Exporting Countries seems to be betting that will change soon. Abdalla Salem el-Badri, OPEC's secretary general, predicted Wednesday that if current prices hold, half of the U.S. oil that is fracked from shale formations will be uneconomic, leading companies to stop producing it.
That view is at odds with most U.S. forecasters, who say output can remain steady at current prices because companies have cut their costs by finding ways to produce oil more efficiently. For example, the amount of oil coming from each new well in South Texas has nearly doubled since 2012, federal data show.
Marianne Kah, chief economist of ConocoPhillips , said oil prices would need to fall to $50 a barrel "if you wanted to completely halt production" in U.S. shale basins. She said 80% of the American shale sectorin which ConocoPhillips is a major operatoris profitable at prices between $40 and $80 a barrel for benchmark West Texas Intermediate crude.
Jason Bordoff, director of Columbia University's Center on Global Energy Policy, said he believed prices would have to fall much further to put significant pressure on the U.S. energy boom. "I am not sure if $80 is enough," he said. "You might need $60 or $65 to really see a stress test."
