When it comes to oil, the decision to invest seems to be pretty clear: when there’s high demand and not enough crude to fill those needs, that decision is even easier for oil companies to invest in new projects… That’s just smart business.
But things don’t always go as planned…
Back in 2014, there were a lot of projects slated to start in 2015. Unfortunately, the problem was that these projects became completely unprofitable thanks to the steep decline in crude prices over the last eighteenth months.
In fact, roughly $930 billion worth of future projects and investments would be rendered useless.
The market quickly become oversupplied with the new flood of oil from tight plays, and China—which normally consumes staggering amounts of oil—actually declined.
And to top things off, Saudi Arabia remained stubborn in helping stabilize the global crude market.
Now that oil is struggling to find support around $40 per barrel, growth in U.S. tight oil may be curbed as much as 40%.
Interestingly, the news hasn’t gotten much better…
You see, Saudi Arabia has once again exerted its muscle inside OPEC, resulting in the oil cartel’s recent decision to maintain output (and even raise the production ceiling), hurting just about anyone in the oil game.
And in the wake crude rout that has persisted over the last year and a half, all U.S. oil companies can do is try to survive. Truth is, most of these companies can’t afford to create new wells, and are struggling under mountains of debt.
These “oil zombies” aren’t leaving any time soon, and their numbers will inevitably grow during the low oil price environment.
To read more, simply click here for the Rigzone article.
Until next time,
A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.
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