Oil closed above $60 a barrel making a new high for 2015. In recent weeks the price of oil has been steadily climbing. Many industry insiders have been calling the bottom now for a couple weeks. Whether we continue the upward trend from here is uncertain but things do appear to be moving in the right direction.
Future of Oil Prices
The future of oil and gas prices is never certain. The oil and gas industry is extremely volatile and we are likely to see some large price swings in the coming months. With the uncertainty in Libya and the middle east, we have seen the price of oil bounce of the lows in the $40’s just a few months ago to just above $60 a barrel today. As we move forward during this uncertain time, it remains to be seen if this is just a temporary blip or if oil will continue higher.
One other factor playing a role right now is the demand for oil. With cheaper oil hitting the marketplace we did see a small surge in demand from consumers and industrial players. This demand comes from reduced cost passed on to the end user which adjusts their demand accordingly. With oil topping $60/barrel, we may see some consumers start to pull back demand slightly as the prices are adjusted to account for this new price.
Oil and Gas Layoffs
While the price of oil may be recovering, the oil and gas industry still has a long ways to go. There have been over 100,000 jobs lost during the oil and gas bust over the last 6 months with more layoffs on the way. Many operators have been forced to adjust their payroll to account for the reduced value of the oil and gas they product. The service companies have been hit hard as well due to lower demand from the operators.
Rig counts are hitting new lows each week as operators lay down rigs in an effort to cut costs and remain profitable. It will likely take months or years for those rigs to come back online and have a meaningful impact on the price of oil.
We’ll continue to keep and eye on market conditions and update mineral owners about it as we learn more.
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