Executive Summary
Domestic oil production has increased significantly over the last few years primarily due to the shale boom in the Permian Basin. The increase in crude oil production in the U.S. has offset some of the declines globally due to production cuts by OPEC and outages in Libya, Iran, and Venezuela. Thus, there has been little pressure recently on global oil prices.
Oil prices rose steadily over the last twelve months, reaching over $70 per barrel in May for the first time since 2014. Prices finished the first half of 2018 around $74 per barrel, but WTI futures prices are in backwardation as global inventory levels are expected to increase. As of late, there has been some pressure on price of WTI due to a need for more infrastructure to take crude out of the Permian Basin.
Natural gas prices, on the other hand, declined in the beginning of 2018, but finished the first half of 2018 around the same price it began the year ($2.95 per mcf). As covered in a post on our blog Energy Valuation Insights, natural gas prices have been negatively impacted by the oil boom in the Permian because dry natural gas is a byproduct of oil production.
