Rising oil prices could sustain financial returns for U.S. shale drillers even as oil field service companies demand more money for rigs and crews, OPEC said Thursday.
U.S. oil companies could make "decent" returns at $53-a-barrel oil and could remain profitable at $60 a barrel even if oil field service costs rise 15 percent this year, the Organization of Petroleum Exporting Countries said in its monthly oil-market report, citing research by JP Morgan Chase & Co.
The Saudi-led group said service companies want higher prices to dispatch drilling rigs, crews and equipment across the United States, after the nation's rig count doubled to more than 900 since May 2016.
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Media: Houston Chronicle"It is costing more to rehire skilled workers owing to a tightened labor market and the availability of equipment," OPEC said. "But producers are still able to achieve decent rates of return."
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In September 2016, U.S. shale oil production fell to a multiyear low of 4.11 million barrels a day in, but it has climbed by 920,000 barrels a day to more than 5 million barrels a day last November.
OPEC believes daily oil production from non-OPEC countries will grow 1.15 million barrels, up 160,000 barrels from its previous projection, on higher expectations for output in the United States and Canada.
Still, global oil demand growth is expected to come in at 1.53 million barrels a day as global economic prospects improve. That's up slightly from the group's projection last month.OPEC's own output increased by 42,000 barrels a day in December, as rising production in Nigeria, Angola and Algeria offset declines in Venezuela, Qatar and Saudi Arabia.
Venezuela's output fell 82,000 barrels a day in December, down to its lowest point in decades as the country's cash-strapped national oil company struggles to pay off equipment suppliers.