Energy should continue to struggle unless we se an agreement on massive production cuts from SA and Russia. I wonder, why would they cut when it benefits US players the most? There is absolutely no production restraint in the US and it would be collusion for US producers to agree to cut. I guess we will overlook little things like anti-trust laws to keep them afloat.?
The market's bias is still up. There are a lot of people looking to get into stocks, despite the bad news that is to eventually come.
SA and Russia IMHO are much better able to play this game of chick then we are; a state owned company can ride out years of poor returns a lot public companies cannot.
It is not collusion, in fact OPEC is actually based on a US model, the Texas Railroad Commission, which has enforced quotas and prorated production in the past. Most notably after the 1930s oil boom up until the 1950s.
The commission is already set to meet to discuss enforcing quotas. (The Oklahoma Corporation Commission has similar powers)
"The state has not imposed production limits since 1972, but has the authority to do so, said Sitton.
“For 90 years someone has been setting the price of oil in the world,” he said, referring to Texas in the 1930s and later to the role of the Organization of the Petroleum Exporting Countries. “I don’t see why we can’t at least be part of the discussion right now.”
As a weekend standoff over oil shipments emerged between Texas pipeline operators and shale producers, a state energy regulator has renewed his controversial call for mandated cuts to address a growing crude glut.
www.reuters.com
It is also costly and time consuming to shut off a well.
Not true at all, we do it all the time. If you have a pad of producing wells, and an adjacent operator is going to frack their wells you typically shut in all wells within a specific, geology dependent distance. This allows the well to build up pressure and will protect them from taking a "frac hit", if you don't do this it's possible to have your well killed by those fracking operations. I would say at any given time we have half a dozen wells shut-in for these reasons.
Now if your shutting in all your wells for 2 years... yeah that's different. That being said decline curves on well are steep enough that for most larger operators just laying down their rigs for 6 months well probably have the desired effect.
www.scmp.com
www.marketwatch.com
