Executive Summary
Oil prices remained relatively steady at $50/barrel over the last twelve months despite OPEC’s wavering commitment to production cuts.
OPEC and non-OPEC producers met in May 2017 and agreed to extend production cuts through March of 2018. OPEC’s stated goal was keeping the price of oil above $50 per barrel and aimed to bring stocks down to 2.7 billion barrels. Even if OPEC was to maintain production cuts, rising U.S. shale oil output is expected to temper the results of OPEC’s reduction in supply. Ongoing oil prices remain below normal levels, but exploration and production activities have increased dramatically from one year ago. The Baker Hughes North American (U.S.) total oil rig count increased over 80% year-over-year.
Additionally, as oil prices stabilized around $50 per barrel, the number of oil and gas companies filing for bankruptcy declined. After the collapse of oil prices Haynes and Boone updated their bankruptcy monitor every two months. But the last time the Bankruptcy Monitor was updated was July 2017 suggesting that the trend of bankruptcies in the oil and gas industry is coming to an end.
The price of crude oil is determined by market forces: supply and demand. On pages 1 and 2, world demand and supply are analyzed in order to understand the current pricing environment.
