By June 2017, the OPEC cuts were failing. Libya, Nigeria, and Saudi Arabia had exceeded their output targets. Total output had risen from 32.37 million barrels per day to 32.67 million barrels per day. The EIA predicted in January 2017 that oil prices would slowly rise throughout 2017 and 2018. But as of August 2017, they still hover around the $50-per-barrel range. What Is the Market Missing? As oil climbed up to $59 per barrel during a brief rally in June 2015, U.S. oil companies began to hedge future production.
By July 2016, U.S. oil production was down from 9.6 million barrels per day to 8.6 million barrels per day – a 10% drop.
These hedges locked in prices that would allow U.S. companies to drill wells and make a reasonable rate of return. In the Permian Basin, wells were profitable in most areas at $50 per barrel… and in the “sweet spots” at $40 per barrel.
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