I have seen the price trade in tight range the last week or two moving between $46 and $48. This could be a new plateau from which the price of oil could rise. What’s interesting about the price of oil at this level is that it has not declined even as oil production from Canada gets back online.
Here are some of some of the reason why the price oil will more likely go up rather than down from here:
- Nigerian production is down 800,000 barrels a day as the result of the conflict and the attacks associated with it. Many observers do not see these attacks abating. Therefore, production could remain at current levels.
- Iranian production is capped out. Industry insiders think that Iran cannot produce more oil above this level without major infrastructure improvements.
- Libyan production is down considerably. Here’s another example of internal conflicts negative impacting oil production. The U.S. with other countries is trying to arm the legitimate Libyan government so it can fight the ISIS forces in the country. I don’t know how fast it will happen. If the Libyans get the arms, that does not mean they will be able to dislodge ISIS who is dug in pretty good.
- Venezuela has to be on the verge of government coup. Coca Cola announced today that it stopped producing in Venezuela because it cannot get sugar. What a disaster! The oil industry is even worse. Schlumberger has completely pulled out of Venezuela because it was not getting paid. I expect production levels to continue to decline.
Kudos to Pennsylvania’s Governor Wolf
PA DEP Secretary John Quigley resigned last Friday. I’m sure it was with considerable prodding by the Wolf administration. The news about his resignation illustrates how biased Quigley was against the industry. We all agree that we want to produce oil and natural gas in methods that are not harmful to the environment.
I am hopeful that Governor Wolf will appoint new secretary who has more balanced perspective on the oil and gas industry.