Local oil producers likely to expand budgets in 2017
Oil prices have bounced within a narrow range this week as traders weighed varying reports of increasing U.S. storage, decreasing world production and saber rattling in Iran, Russia, North Korea and other parts of the world.
While U.S. and global oil production have had the largest influence on oil prices in recent years, geopolitical instability historically has been a key factor.
Abroad
Not long ago, increased rhetoric concerning Iran, Russia or North Korea would lead to immediate price spikes, regardless of whether oil production was directly threatened. But oil prices barely moved this week despite heightened tensions in all three areas.
The oil price gained some ground Wednesday after the Trump Administration put Iran “on notice” following a missile test, but the price slipped back Thursday despite reports of additional sanctions on Iran and as United Nations Ambassador Nikki Haley condemned Russia’s most recent attacks in Ukraine.
This week’s news follows shortly after reports that the North Korean government may be restarting nuclear facilities.
Near-record oil storage levels in the United States and worldwide have reduced the effect of geopolitical issues on oil prices over the past two years. Despite slowing world oil production, it appears oil stocks still are providing a buffer to volatile news.
Domestic benchmark West Texas Intermediate crude futures slipped 34 cents Thursday to close at $53.54 a barrel. The price has held between $51 and $55 since the start of the year, following an agreement by many of the world’s largest oil exporting countries to cut back on production.
So far, it appears the Organization of Petroleum Exporting Countries and other large producers generally are sticking to their commitments.
Still, domestic storage levels increased this week, largelybecause of low demand this time of year. The country’s commercial storage increased 6.5 million barrels this week to 494.8 million barrels.
At home
Storage in Cushing slipped to 64.1 million barrels, down 1.3 million barrels from one week ago.
While overall storage levels increased this week, domestic production continued to slip, dipping to almost 8.92 million barrels a day, down 46,000 barrels per day from one week ago and down 299,000 barrels per day from one year ago.
U.S. production has declined throughout much of the year, but rising oil and natural gas prices over the past few months have led executives to consider boosting 2017 drilling budgets.
We’ll get more details from Oklahoma companies over the next two weeks as they report 2017 earnings, but early indications are that companies will be spending more on drilling in Oklahoma this year.
Continental Resources Inc. last month said it has more than doubled its drilling budget in 2017 to $1.9 billion. Other companies likely also will boost their drilling activity this year.