HOUSTON (Reuters) – A decision by OPEC and allied countries to cut crude production through March delivered an end-of-Christmas gift to U.S. coal companies whose costs have gone down, but could rise any in prices driven by the unexpected movement was just like medium stock stuff.
U.S. crude oil production has fallen 2 million barrels per day in the past year as low prices and demand force coal producers to cut losses. Investors had already been pressuring the industry to curb spending and to boost yields before the pandemic struck. Coal production has been sharply cut, but could return quickly if prices continue to rise.
On Tuesday, Saudi Arabia, the world’s largest oil exporter, said it would voluntarily reduce by 1 million barrels per day (bpd) in February and March, after Russia pushed to increase yields, worrying about U.S. shale taking advantage of agency cuts.
Russia and Kazakhstan will increase production, not trusting to link market share to the United States. In total, OPEC + had expected to recover 500,000 bpd in each of the two months. Saudi officials were concerned that a new boost would trigger demand during new coronavirus locks.
Prices for West Texas Intermediate on Friday rose $ 52 per barrel, and the price of futures hit a 12-month high, which producers use to plan costs on new wells, $ 51.37 per barrel, up from $ 44.63 at early December.
Graph: Average US crude oil production, by month –
BOTTOM SITES TO BACKGROUND
Higher crude prices will fall directly to the baselines of U.S. producers due to recent cost cuts and promises to keep production smooth. Companies promised to maintain a flat return and to use any price increases to increase investor returns or pay off debt.
(For a chart on the decline of U.S. oil production, go here 🙂
Rising prices in recent years “have tended to be a difficult thing,” said Thomas Jorden, chief executive of Cimarex Energy. “We are going to be very disciplined in setting a budget,” he said at a Goldman Sachs conference on Thursday.
In the two major U.S. shale sectors, oil and gas companies are profitable in the $ 30 per barrel range to a low $ 40s per barrel, according to data company Rystad Energy. Year-over-year prices could push the company’s coalstone money from activity up 32%, Rystad said.
Another feature that will benefit producers is low oilfield service costs. Companies that provide broken sand and tax-cutting services will have additional capacity and have not been able to build them.
“The margins are terrible,” said Chris Wright, chief executive of Liberty Oilfield Services, North America’s second largest bankruptcy company. “They’re a little better now than they were six months ago, but they’re still terrible.”
INCLUDING INCLUDING INCLUDING
Liberty has kept customers through the pandemic, but prices are still so low that it didn’t make sense to go after newcomers. Demand for fracking services is improving but is falling short of levels that would boost U.S. fuel, he said.
Stone producers have historically raised production budgets with rising oil prices, said Linda Htein, senior research manager at advisory group Wood Mackenzie. But “this period may be a little different” as global demand remains uncertain, she said.
Oil would have to hit $ 60 to $ 65 a barrel to bring U.S. output back 1 million barrels per day while improving investor yield, said Raoul LeBlanc, vice president at data provider IHS Markit.
Power officials in Colorado, Oklahoma, Wyoming and northern New Mexico released in a Federal Reserve Bank of Kansas City poll on Friday that oil prices would have to cost them an average of $ 56 per barrel for significantly increased drilling.
The industry withdrew activity so much last year that oilfield operations this year will mean “slowdown rather than growth,” said Sarp Ozkan, chief executive of analytics firm Enverus.
Reporting with Jennifer Hiller in Houston; edited by David Gregorio