Oil prices just hit their highest level in three years
Oil approached $62 a barrel for the first time in three years, surpassing a crucial threshold for spurring new shale drilling.
Wednesday’s 2.1% jump in New York-traded futures delivered exactly what the largest cohort of oil executives in a Dallas Federal Reserve survey last month said they needed to justify more shale exploration: prices above $61. If crude continues to climb and crosses the $66 mark, even more corporate chiefs indicated they’re ready to pile in, according to the survey.
U.S. shale drillers have become OPEC’s bogeyman because of their penchant for lightning-fast drilling expansions that threaten to undo the cartel’s hard-won reductions of a worldwide glut. For the day, oil rose on expectations that a U.S. government report scheduled for release on Thursday will register the longest decline in crude stockpiles since the summer driving season.
“The U.S. shale-OPEC tug of war will simultaneously cap upside price potential and downside risks,” said Stephen Brennock, an analyst at PVM Oil Associates Ltd. in London.
In its survey of more than 100 oil industry executives in Texas, New Mexico and Louisiana, the Dallas Fed found 42% would expand drilling with prices between $61 to $65. An additional 31% would increase investment when prices top $66, the survey found.
Oil has risen for the past two years as the Organization of Petroleum Exporting Countries and allied producers including Russia trimmed supplies to reduce a global glut.
West Texas Intermediate for February delivery rose $1.26 to settle at $61.63 a barrel on the New York Mercantile Exchange, the highest close since December 2014.
Brent for March settlement rose $1.27 to $67.84 on the London-based ICE Futures Europe exchange. The global benchmark crude traded at a premium of $6.29 to March WTI.