Shale Drillers Hit the Brakes, Feeling the Hurt of Sinking Oil Prices
U.S. oil and gas producers were unabashedly bullish on their prospects upon entering 2017. Fueling that view was the expected positive impact that two years of underinvestment and a step-up in efforts from OPEC would have on the market's oil glut. In fact, those improving conditions had the industry envisioning that oil would be in the mid-$50s this year, which was high enough that most shale drillers could ramp up their activities and start growing again.
Unfortunately, shale drillers were a bit too bullish, and ramped up way too fast, unleashing a gusher of new oil production in the process. Add in rising output from Nigeria and Libya, which are exempt from OPEC's cuts, and weaker oil demand growth earlier this year, and the glut has barely improved since OPEC announced its efforts to drain the market's supply overhang last November. Because of that, oil has fallen into the $40s, which is forcing producers to take a hard look at their budgets.
Image source: Getty Images.
Source: Fool.com
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