Crude Surges Beyond $61-a-Barrel Trigger for Shale Expansion
Expectations of U.S. crude stockpiles declining push oil prices higher.
(Bloomberg) -- Oil approached $62 a barrel for the first time in three years, surpassing a crucial threshold for spurring new shale drilling.
Wednesday’s 2.1 percent jump in New York-traded futures delivered exactly what the largest cohort of oil executives in a Dallas Federal Reserve survey last month said they needed to justify more shale exploration: prices above $61. If crude continues to climb and crosses the $66 mark, even more corporate chiefs indicated they’re ready to pile in, according to the survey.
U.S. shale drillers have become OPEC’s bogeyman because of their penchant for lightning-fast drilling expansions that threaten to undo the cartel’s hard-won reductions of a worldwide glut. For the day, oil rose on expectations that a U.S. government report scheduled for release on Thursday will register the longest decline in crude stockpiles since the summer driving season.
“The U.S. shale-OPEC tug of war will simultaneously cap upside price potential and downside risks,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London.
In its survey of more than 100 oil industry executives in Texas, New Mexico and Louisiana, the Dallas Fed found 42 percent would expand drilling with prices between $61 to $65. An additional 31 percent would increase investment when prices top $66, the survey found.
West Texas Intermediate for February delivery rose $1.26 to settle at $61.63 a barrel on the New York Mercantile Exchange, the highest close since December 2014.
--With assistance from Ben Sharples and Grant Smith
To contact the reporters on this story: Javier Blas in London at jblas3@bloomberg.net, Meenal Vamburkar in New York at mvamburkar@bloomberg.net.
To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net, Joe Carroll, Jeffrey Taylor
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