Oil Prices Reach Highest Since October 2014
US Shale Oil Production Slows...Concerns Over Further Increase
[Asia Economy Reporter Hyunwoo Lee] The price of West Texas Intermediate (WTI) crude oil in the United States has surpassed $90 per barrel for the first time in over seven years, threatening to break the $100 mark. Despite price collusion by the major oil-producing group OPEC Plus (+), concerns are rising that oil prices will increase further as U.S. shale oil production, which had previously kept prices down, is slowing.
On the 3rd (local time) at the New York Mercantile Exchange (NYMEX), the WTI price rose 2.27% from the previous session to $90.27 per barrel. This is the first time WTI prices have crossed the $90 mark since October 2014, over seven years ago. Brent crude from the North Sea on the London ICE Futures Exchange also rose 1.83% from the previous day to $91.11 per barrel.
On the same day, The Wall Street Journal (WSJ) analyzed that the stagnation of the U.S. shale oil industry is fueling the sharp rise in oil prices. WSJ pointed out, "The U.S. shale boom is over," noting that U.S. shale oil production began to decline before and after the COVID-19 pandemic, with U.S. oil production dropping from about 13 million barrels per day in early 2020 to 11.5 million barrels per day."
The U.S. Energy Information Administration (EIA) also reported, according to WSJ, that the daily growth rate of U.S. oil production this year is about 5.4% compared to the previous year. The slowdown in shale oil production is attributed to a significant reduction in remaining reserves in major developed wells, combined with rising raw material and labor costs, making the development of new wells difficult.
Scott Sheffield, CEO of Pioneer, a major U.S. shale oil company, explained in an interview with WSJ, "It is unlikely that we will see annual production increases of 15% to 20% as before," adding, "Considering investors' financial pressures and the limited reserves in remaining wells, even the largest companies will inevitably face growth constraints."
Along with the contraction of U.S. oil production and escalating geopolitical tensions such as the Ukraine crisis, there are forecasts that international oil prices could surpass $120 per barrel. Natasha Cerniv, head of commodities research at JPMorgan Chase, told Bloomberg News in an interview, "Geopolitical risks surrounding Russia and Ukraine have definitely increased, and if tensions escalate, international oil prices could rise to $120 per barrel."
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