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Shares of Bakken shale oil producers plummet after OPEC decision

Shares of U.S. shale oil producers tumbled on Friday after OPEC failed to agree on a unified output cap, effectively letting its 13 members pump at will in a step likely to further depress prices and advance the group's aim of squeezing out U.S. ...

Shares of U.S. shale oil producers tumbled on Friday after OPEC failed to agree on a unified output cap, effectively letting its 13 members pump at will in a step likely to further depress prices and advance the group's aim of squeezing out U.S. rivals.

OPEC ministers ended their policy meeting in Vienna on a discordant note, unable to decide as a group how much it should pump in aggregate.

As the meeting was underway it appeared that OPEC would raise its current 30 million barrels per day cap on production, but negotiations broke down after Iran said it would not accept any limits until it emerges from Western-imposed sanctions.

Iraq's oil minister echoed those sentiments, asking after the meeting why OPEC members should accept a production cap if non-OPEC oil producers do not have one.

The inaction on OPEC's part, combined with the bullish production statements from ministers, exacerbated already-tense fears of oversupply in the global crude market and sent Brent and U.S. oil prices lower, dragging down U.S. energy stocks with them.

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Tim Rezvan, an oil analyst with Sterne Agee CRT, said OPEC's decision heralds a "bearish near-term event" for the U.S. oil industry.

OPEC gave a tacit acknowledgement that its policy of flooding the globe with crude is harming rivals. In a statement, the group noted that it expects non-OPEC supply of oil to actually contract next year, even as demand rises.

Shares of Whiting Petroleum, Continental Resources and Oasis Petroleum, top North Dakota oil producers, each fell more than 6 percent.

Marathon Oil, Hess and Occidental Petroleum each fell about 2 percent. Marathon and Hess have large investments in North Dakota oil and gas.

OPEC's lack of action only fuels the argument for allowing U.S. exports of crude oil, several industry leaders said.

"This is just an effort on OPEC's part to see if they can outlast shale oil exploration and production in the United States," said Ron Ness, president of the North Dakota Petroleum Council, an industry trade group. "It's a strong signal back to Congress that it needs to find a way to get that crude oil export ban eliminated."

Most of OPEC's members, including Venezuela, need higher oil prices to balance their national budgets.

Given that need, some in the U.S. oil industry had held out hope that OEPC would actually lower its production at Friday's meeting, an expectation that now seems misguided as Saudi Arabia, the group's de facto leader, has aggressively pursued a strategy of high production in order to rattle U.S. rivals.

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"I don't see how anybody in their right mind thought that the Saudis were going to cut production," said Mike Breard, oil company analyst at Hodges Capital Management in Dallas.

"I guess some people were holding out hope."

Senior energy bankers in Houston on Friday said persistently low prices are increasingly separating U.S. shale companies into two camps: those that have good enough acreage and strong enough balance sheets to weather the downturn and those that will need to restructure or go into bankruptcy.

With benchmark U.S. West Texas Intermediate slipping more than 1 percent to below $40 a barrel, a psychological barrier may have been crossed, the bankers said.

They added that there is so much uncertainty over prices right now that companies are having troubling planning their futures.

Meanwhile, capital raising was hitting bumps. NGL Energy Partners LP was struggling to muster interest on Friday for a new high-yield bond, as investors grow skittish, prompting the issuer to offer higher interest rates, IFR reported.

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