OPEC deal would encourage US shale producer rally

Significance

The US shale industry has emerged from the worst of the crude price downturn battered, but also leaner and more efficient. Many shale producers are eager to return to growth, buoyed by a more stable oil price at around 50 dollars per barrel. However, oil prices need to rise somewhat higher still to give enough of a jolt to the industry to see US oil production return to meaningful growth.

Impacts

• Oilfield service companies, especially fracking specialists, stand to gain if shale drilling activity picks up on the back of higher prices.
• The Permian shale in West Texas will lead any US shale recovery, due to its lower costs and large reserves, boosting the region’s economy.
• The Bakken and Eagle Ford shale plays will follow the Permian shale in a price recovery.
• Prices above 70 dollars per barrel would probably be required for investment to return to Gulf of Mexico deepwater projects.