by Jody Chudley
There's a shocking statistic you need to know about U.S. oil and the outlook for 2015.
Today, I'm going to lay it out on the table – with a full case study.
Fact is, one U.S. producer may have just let the cat out of the bag during their 2015 guidance announcement.
If you're invested in oil now or plan to invest in 2015, this is a story you MUST know.
That said, let's get our bearings…
Six months ago, oil was near $100 per barrel and the extremist group ISIS was making headlines in the key oil-producing nation of Iraq.
As you might remember, there weren't many stories in the media back then about an upcoming oil price collapse. Any stories at that time about a big movement in the price of oil were those warning about an upcoming spike.
The following 40% (and counting) decline in the price of oil has, therefore, been more than a bit of a surprise to most of us.
The price of oil had already experienced a dramatic drop prior to the OPEC meeting in late November. When the Saudi-led cartel announced that it would not cut production to support prices, the bottom completely fell out.
Since that meeting, various OPEC officials led by the Saudi oil minister Ali al-Naimi have further indicated that we also shouldn't expect any OPEC action anytime soon. The core OPEC group of financially strong countries (Saudi Arabia, United Arab Emirates, Kuwait) all seem willing to let the oil market sort out the correct price for itself.
I don't know how low the price of oil will ultimately go in the near future, but I do know that the seeds for an oil price recovery are already being planted by North American shale producers.
These companies are dramatically slashing their capital spending plans for 2015, and I believe that the impact on production will surprise the markets.
The reason shale producers are cutting is twofold.
First, with oil prices down 40% and the debt markets for oil producers in disarray, they simply don't have the cash to spend on drilling.
Second, at current oil prices, drilling shale oil wells does not make economic sense. The number of drilling locations these companies have is not infinite, and therefore, the rational decision is to wait until oil prices recover to drill wells.
