By Isaac Cohen*
In April, US oil prices climbed above US $55 per barrel, after falling in March to less than US $44, the lowest price in six years. This increase encouraged the perception in the markets that the fall in oil prices, which started in the summer of last year, could be coming to an end.
However, several adverse factors are clouding the outlook, such as the slowdown in the rest of the world economy, increased confrontations in the Middle East, the Greek debt negotiations and the strength of the US dollar. Perhaps as a consequence, the Wall Street Journal revealed some investors were moving out of US oil futures markets, which may indicate there is concern that oil prices may slide back again.
Given that the center of gravity of world oil production is transitioning from the Middle East to Texas and North Dakota, another oil price decrease will mean US oil producers, particularly users of hydraulic fracturing, will have to continue reducing production.
Thus far, the price fall has led US producers to shut down about half of active oil rigs, from 1600 that were operational last year to around 800 in April. Even so, US oil production this year, will reach 9.4 million barrels per day, the same as Saudi Arabia’s production. Additionally, the Energy Information Administration projects the United States may become a net exporter of energy by 2019.
*International analyst and consultant. Commentator on economic and financial issues for CNN en Español TV and radio. Former Director, UNECLAC.