OPEC's Algiers deal may turn into just the boost the U.S. shale industry is looking for, writes Justin Jacobs in Petroleum Economist:
" ... While low prices led to deep cuts across the sector, they also added impetus to new thinking on how companies could squeeze more out of every rock drilled and dollar spent. Companies are dropping more wells from a single drilling site. Those wells are also being drilled longer-nearly 3km in some cases-and being pumped with more frack sand and proppant, helping to get more out of each well. At the same time, producers have pressured their suppliers for ever-lower rates, helping push drilling costs down by around 30% over the past two years.
"All of it has helped push breakeven prices across the shale patch to around $45 a barrel. This comes with the caveats that as the industry returns to growth, companies will see some of those productivity gains slip away as they drill more marginal wells and will see costs rise as service companies claw back discounts extended during the downturn. Opec's ministers seem to have underestimated how low breakevens could go.
"Opec also underestimated how difficult it would be to cut off funding from capital markets, the lifeblood of the shale industry."
Read the whole thing here.