On Tuesday, may 17 oil on world markets continued to rise, reaching a maximum in 2016 of values. The cost of July futures for Brent oil mix reached 49,23 dollars per barrel, WTI for the first time since November 4, 2015 exceeded $ 48 per barrel.
However, the positive dynamics, which is so long awaited by many market players, will please not all. The American channel CNN claims that the US oil shale industry, the growth of oil prices can help. “This is the harsh reality: oil prices are recovering too late to save many U.S. oil companies drowning in debt, it will not succeed,” writes CNN.
This is not an allegation. Monday, June 16, filed for bankruptcy one of the largest American oil companies SanRidge Energy, the debt of which is four billion dollars. Last week the same thing happened with the Energy company IINN debts that exceed ten billion. Over the past week on bankruptcy also announced several companies engaged in oil production and oil exploration. According to the firm Haynes and Boone, this year issued a bankruptcy already 29 American oil and gas companies.
CNN says that the majority of these enterprises have accumulated debts in the period of prosperous conditions, when oil exceeded $ 100 per barrel. Then high prices and investor interest helped them to restructure the debts. Largely such companies are engaged in profiteering. But now their margin has come to an end, and even began the growth is unlikely to rescue from bankruptcy a number of companies. And this despite the fact that earlier in the week, investment Bank Goldman Sachs has announced that for the first time in two years to replace the overproduction of oil on the world market has come the deficit.
However, just to bury the us shale industry early. At the beginning of the year edition of the Wall Street Journal predicted that by the middle of 2017, a third of oil and gas companies in the US will be forced to declare bankruptcy or to restructure the business. Meanwhile, potential buyers wait until the debts of the bankrupt enterprises will be written off and the asset will fall in price. If at that time will remain in the price of 45-50 dollars per barrel, the new owners will be able to establish the break-even production. However, the question is when it will be and not whether the market is busy by this time.
— Game slide, led by middle Eastern countries, has led to the fact that American companies are more strength left to hold on to, ” says the head of analytical Department of national energy security Fund Alexander Pasechnik.
— Shale miners and so held out long enough. But this opportunistic pit, especially in January, when the prices of a marker grade has fallen below $ 30 per barrel, it became for all shock scenario. Slate miners tried to resist this and was hoping it was a temporary phenomenon.
But we see that now began a flurry of bankruptcies. Last year they somehow managed to agree with creditors and to delay the procedures of their financial insolvency, but now the chances for this remains. To operate in a declining revenue for repayment of loans more difficult, and it affected the situation in the industry. That’s why despite all the talk about the fact that many shale deposits are ready to work with the settings below 40-50 dollars per barrel, the crisis continues to deepen. The optimum level for most fisheries — is the price of 45-50 dollars. But the current achievement of the quotes acceptable levels does not form a General pattern for American shale miners. It’s very difficult to turn the situation around.
On the one hand, shale projects are fairly easy to stop and revive, and this allows us with optimism to look at shale miners. But from the point of view of investment nearly two-year period of the rapid fall in oil prices will not be in vain. He will sober up investors, and the inertia of the month we will observe the bankruptcies in America.
“SP”: — Can we say that Saudi Arabia, which, according to some experts, wanted a way to get rid of competitors, have succeeded?
Saudi Arabia, of course, could not herself to lower oil prices. But they did not reduce their productive capacity and the market has formed an objective picture of the surplus oil, which had to be added. Added someone who had a commercial advantage, i.e. low cost production. The Americans could not compete with middle Eastern producers.
The lifting of sanctions with Iran is also affected. The Americans, allowing them to lift the restrictions, in fact, topple the oil market. But they played their game. Stepping on your throat, they tried to create big problems for Russia. As you know, we in the “fat years” the budget more than half depended on the intervention of the oil and gas sector. The Americans wanted to pay us double strike — sanctions pressure, coupled with the fall in commodity markets. They expected that we oslablen and exhausted its reserves. But, as we see, this did not happen, but largely failed their own shale industry.
“SP”: — That is he have got themselves in a hole that was dug for us?
How do you say… In America, the oil and gas sector occupies in the economy and the budget small fraction. But there is a huge consumption of gasoline and automotive boom. And now a gallon costs about two times cheaper than in the beginning of 2014. With these positions for America’s low energy prices is a blessing, as they still are the largest importers of these products. So in this situation there are pluses for them. Their shale sector fails, it is true, but in a macroeconomic sense, the US feel quite comfortable.
“SP”: — in General, the current increase in oil prices is a temporary phenomenon or a long-term process?
— The economy is cyclical, and the price of oil is no exception. Now comes the recovery phase of the commodity markets. How long it will last is debatable. I think at least a year and a half it will take to restore oil prices to the level of 50-60 dollars. And then you need to see how the situation will change, grow demand, what will be the pace of urbanization in China and India, and so on. In addition, pending investment over the past two years will gradually returning to the sector. I won’t plan further than a year or two, but in this period the possibility of a balance. This year, I think it is possible to close at the average price tag of around 45-50 dollars per barrel. This is a perfectly acceptable price tag for both oil producers and consumers.
Director of the energy development Fund Sergey Pikin believes that in the future oil shale industry, the US has a chance to recover.
— Now we do see bankruptcy and huge debts. But the fact is that the mines themselves will not disappear. They can change owners, and at favorable conditions, assets will re-enter the market. It is about 50-55 dollars per barrel for WTI and now we’re getting close to this figure. But the problem is not just low oil prices. The fact is that due to adverse market conditions, increased risk appetite and, accordingly, jumped up requirements for risk premiums in the financial market for US oil companies.
“SP”: — What does it mean?
To put it more simply, this means that us shale companies increasingly more difficult to occupy the market. That is why they go bankrupt. Investors demand a higher yield, and in a situation of low prices of the company are unable to show it. As a result, they are unable to restructure its obligations with longer maturities.
There is another trend that started a few weeks ago. A number of companies, in particular, the pioneers of the “shale revolution” that started very actively to buy insurance with the current level of 46-47 WTI in dollars per barrel. This means that they are insured in case of possible future price declines. Such enterprises will feel more steadily, the more that the volume of production from year to year increases. I think in a short time and the level of $ 45 will be sufficient to ensure that the company worked without losses.
Extraction of the shale rocks is a technology that has changed the investment life cycle of the oil and gas industry. If earlier projects were conducted from five to seven, and even ten years, but now in order to start mining required from several weeks to months. This means that the oil market has an additional tool of flexibility. In many ways, the pricing is now determined not under the influence of OPEC, and the result of what is happening with production in the United States. America has become quasiregular market for the global oil market. Now the price situation tends to increase. There may be setbacks, but the trend is up. This means that after the bankruptcy and purification sector, physical assets can again become a part of someone’s business.
However, as I said, access to Finance even for new firms is very difficult. So to work effectively they will be able only with the onset of the period is quite comfortable in oil prices.
“SP”: — Can we say that Saudi Arabia managed to get rid of shale competitors, or is it a conspiracy?
— Period of oil prices above a hundred dollars a barrel laid the Foundation for the development of unconventional sources of energy. This applies not only to shale oil, and deepwater production offshore, tar Sands and other projects. Saudi Arabia’s goal was to remove from the market competitors with high cost. Because at one hundred dollars per barrel, these competitors could work, despite the high cost of production. When Brent went down, the Saudis felt that the price drops to $ 70, will leave expensive projects, and they have all be great.
But the price has gone much lower and eventually reached $ 27 per barrel, not a little frightened already Saudi Arabia itself. Riyadh immediately without any reservations at a meeting with Russia agreed to a freeze of production. Of course, in the end this did not happen, including the fact that the prices have gone up, but it was evident that the drop below 30 very quickly leads to a feeling of even Saudi Arabia. It’s not conspiracy theories and the conventional market war. Defeated the Saudis or not, hard to say. One thing is clear: to agree on production levels within OPEC is no longer possible. Of regulatory organization he moved into the category of expert and analytical, and now, each country decides on production regardless of OPEC.
