Two special questions offer key insights
WTI crude is trading down $0.52 to $59.44 today.
The key now is investment and further production growth. The EIA is predicting the US will hit 13 million barrels per day from about 12.1mbpd now. Others aren't so sure.
One reason is that there is a renewed focus on returning capital to shareholders via dividends and buybacks. The cheap and endless money days are gone and shareholders want to see profitability. That may mean less exploration, expansion and aggressiveness.
What's key are the breakeven rates. The Dallas Fed asked two special questions in its latest survey of oil producers. The first was on the price needed to cover operating expenses for existing wells -- the shutdown rate. That fell to $33 this year from $35 last year.
The Permian and Eagle Ford areas remain the cheapest and that bodes well for drillers in the area, where there is still a generation of untapped potential.
At the same time, drillers are still reluctant to dip in. The overall price needed for a new well is $50. That's down from $52 last year but with prices only $9 higher, the appetite for that kind of risk might not be there. However if oil gets to $65 or $70, I imagine there will be far more activity.
