FYI: Back in October, when the oil slide was already pronounced, the energy industry was taking it in stride. “Oil prices would need to fall at least another $20 a barrel to choke off the U.S. energy boom, industry experts say,” the Journal wrote back on Oct. 29, when the price for WTI crude was around $82 a barrel.
On Thursday, WTI crude closed at $59.95, down 44% from its June highs. In early trading Friday, WTI kept sliding, falling under $59, too. By mid-morning in Europe, it had recovered only slightly, to $59.25. It is now certainly “at least another $20″ from those late-October levels. That may not be precisely the choke point, but the collar’s getting very tight.
“Sub-$70/barrel WTI in 1H15 will ultimately slow U.S. production, and could permanently stem future momentum in U.S. supply growth,” Deutsche Bank analyst Stephen Richardson wrote. ”Capital will be rationed, production growth revised down, and expectations reset lower.” The shake-out will be what he termed “non-linear,” meaning it won’t hit all the companies the same way. Energy companies with more debt than cash, with poor reserves and high operating costs, will be hit harder.
Regards,
Ted
http://blogs.wsj.com/moneybeat/2014/12/12/morning-moneybeat-oils-slide-brings-sector-closer-to-the-choke-point/tab/print/Current Futures:
http://finviz.com/futures.ashx
