Frackers Face Big Cash Crunch This Fall: Survey

Oil experts forecast crude prices will decline this fall to levels where many shale producers could be unable to make money, and some see prices staying very low through the end of the year, according to a new CNBC Oil Survey.

The analysts and traders surveyed were far gloomier in their outlook for U.S. crude prices than they were just a few months ago, with a majority now forecasting prices for West Texas Intermediate will drop to between $30 and $40 per barrel this fall and stay low into the end of the year.

The survey also found that 43 percent see a break-even price for the U.S. shale industry of $45 to $55 per barrel, well below where many expect prices in the next couple of months.

Another 24 percent estimated the level where drillers make money is even higher – at $55 to $65 per barrel. But 20 percent see break-even prices at $45 or less and half of those see them below $35 per barrel.

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A majority, 62 percent, see West Texas Intermediate crude trading in the $30-$40 per barrel range in September and October. However, 32 percent see prices recovering to between $50 to $60 by year end. The same number expect year end prices at $40 to $50, while 23 percent expect prices to remain in the $30 to $40 range.

This contrasts sharply with earlier forecasts. In a June survey, the average year-end forecast of participants was that West Texas Intermediate crude would be at $60.80 per barrel.

WTI futures broke below their 2015 high last week and settled at $42.50 per barrel Friday.

Now, just 14 percent in the survey, conducted last week, expect WTI to rise above $60 by year end.

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“This is a pretty tough market, and lower prices are going to rebalance it,” said IHS Vice Chairman Daniel Yergin. “We see a tough couple of quarters for producers…next spring demand is going to go down again.”

As for Brent, 71 percent see prices this fall of between $40 and $50 per barrel. Thirty-six percent expect it to reach $50 to $60 by year end, while 32 percent expect it to rise to between $60 and $70. Another 32 percent see Brent between $40 and $50 at year end.

In the latest survey, an overwhelming majority, 57 percent, blame global supply for the current decline in prices, as opposed to a lack of demand or other factors.

“The stunning fact is that Saudi Arabia, Iraq and the U.S. together added 2 million barrels a day to world oil supply since the price collapsed,” said Yergin. “And this is even before Iran came back to the market.”

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