Oil Companies Battered By Falling Prices
Low oil prices tend to spike demand. However, some oil companies cannot make money when they are too low. With crude at $60, this has started to happen.
Those who influence oil prices will need to make a decision soon. The decision will almost certainly determine how to drive prices higher. Major oil companies could pull back production and exploration. However, those do not affect oil prices immediately.
Saudi Arabia Breaks Even
The most likely increase in oil will be for geopolitical and financial reasons. A school of thought says Saudi Arabia’s cost to protrude is about $12 a barrel. The reality is wildly different. According to Oil.com, “Rising OPEC+ output this year could weigh down on oil prices, which have been hovering in the low $70s per barrel in recent weeks. That’s well below the $91 per barrel that the International Monetary Fund (IMF) thinks is the oil price needed to balance Saudi Arabia’s budget.”
Therefore, $60 oil is a big problem for Saudi Arabia as it is for US frackers. According to Hart Energy, operators in the US Shale Basin need a price of $54 to break even.
The other side of the coin is the broader economy. At $60 a barrel, gas prices drop well below $3.00 for the average gallon of regular nationwide. The cost of petrochemicals, heating oil, and jet fuel also drop.
Exxon’s stock price is down 3% in the last year. Is it any wonder?
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