Until consumption improves oil prices aren’t likely to recover
Wednesday, April 8, 2020
COVID-19’s effect on global demand for oil has outweighed the impact of the current financial crisis, according to Raymond James & Associates Inc.
John Freeman and Pavel Molchanov believe the capital expenditure reductions announced by the exploration and production sector can reduce supply. The problem is it may take a while for those reductions to impact the market and raise prices.
On the other hand, an increase in shut-in wells of existing production could lead to less supply immediately. Furthermore, when the pandemic subsides and demand recovers, some shut-in wells may never resume producing. The result would be a “rapid bounce in oil prices,” according to Natural Gas Intelligence.
Learn more: Natural Gas Intelligence > Benefits of Cheap Oil ‘Largely Theoretical” Until Consumption Improves, Sara Raymond James
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Shale FAQ
What is fracking?
Fracking is a slang term for hydraulic fracturing. Fracturing is a process by which highly pressurized fluid is pumped thousands of feet into the ground to fracture rock formations. The goal is to release the natural gas that’s locked inside the rock.
Is it safe?
What most concerns people about fracturing is ground water contamination. The worry is that fractures underground, caused by the process, will extending upwards and into aquifers, releasing gas and chemicals into the ground water supply. There’s been no confirmed reports of such a thing happening. Though surface spills and drill site blowouts can lead to localized environmental concerns.
Will my water catch on fire?
Flammable water is caused by the release of methane gas into a drinking water supply. Methane gas occurs naturally and can be released by any kind of drilling, including water wells. In Pennsylvania officials fined Chesapeake Energy $1 million for contaminating ground water with methane. It was determined that the company had not properly cemented it’s boreholes and gas migrated up the well, between rock and into aquifers.