This morning, I read a Bloomberg article entitled, These Numbers Show the Huge Challenges Now Facing OPEC Members, that stated, “[t]he price of a barrel of Brent crude has more than halved over the past five years, triggering an existential crisis for the world’s biggest oil producers.”
I sipped my coffee and thought, Très mal way to start the morning. Well truth be told, I sipped my coffee and looked up the definition of existential crisis, then I thought to myself, Très mal.
Just when I thought things were stabilizing and on the cusp of looking up in the energy sector, the folks in the know are saying the biggest producers in the world are, according to the Psychology Dictionary definition of existential crisis, at “a stage or turning point where the person is faced with finding the meaning and purposes in life” and questioning the foundations upon which they are built.
This is V heavy news. It makes me wish I was still sitting in the woods of Wyoming at my favorite waterfall…
So what is going on?
According to the Bloomberg article, a higher “break-even” price has been exposed – meaning the price per barrel needed for U.S. producers to make a profit is higher than was previously estimated. Bloomberg reports that, “[d]espite enormous strides in technology and cost-cutting, U.S. shale by contrast still requires about $50 to $55 per barrel to make the bulk of its projects profitable, according to Goldman’s estimates.”
In addition, the Bloomberg article discusses the “fiscal break-even price” – “or the magic figure at which producers can balance their budgets,” and estimates that to be $70 per barrel this year.
The Bloomberg article also reports more heavy news: “While the research shows some forced adjustments to the era of lower oil prices, it also hints at more pain to come by pouring cold water over the optimism surrounding oil producers’ attempts to diversify their economies.”
As I write this, the price of oil is rising a little, but is still on the low end. According to Bloomberg Energy, WTI Crude Oil is at $45.70 per barrel and Brent Crude is at $47.97.
After reading this, you may be asking when the next long weekend is – Labor Day is Monday, September 4, 2017.
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