For years, OPEC has done everything it could to try to drive US oil producers out of the oil market. This may have been one of the motivating factors that led to the record drop in oil prices, which occurred between late 2015 through the middle of 2016. As the world watched oil prices drop from the $100-$105 range to as low as the low $20s, US oil producers indeed had to cut back production and shut down operations.
The effects of these price manipulation efforts instituted by OPEC were short lived, showing the resilience on US oil companies. The ability of these companies to restart operations on the heels of oil price increases have made it clear that US’ top oil producers are going no nowhere.
It was only a matter of time before OPEC had to start cutting its own oil production levels in order to give support to prices that were leading to financial difficulties throughout the Middle East. With every tick upwards of oil prices during the third and fourth quarters of 2016, into 2017, US oil companies were doing all they could to revitalized dormant operations, especially in the robust Texas Permian basin.
Today, the concern over the high costs of drilling and excavation are being offset by new technologies that were being developed during the oil price sabbatical. These new technologies have allowed US oil producers to cap cost increases to approximately 10%-15%, year over year. With new cost controls in place. the recovery for US oil producers is moving along much faster that anticipated.
In an interview with CNBC, Bank of America Merrill Lynch oil analyst Sabine Schels had this to say about the effects of current drilling costs: “People will come back into the market and we may also see availability of mine sand go up later this year or in early 2018. So there will be cost inflation, but not that much.”