Whilst companies may go bankrupt and debt holders may lose out, those that ultimately end up owning the assets will keep the O&G pumping provided the POO is above the cash cost of production which some analysts say is $20-30 bbl for US shale
Only the best of the shale producers have cash costs of $30. It's a steep supply cost curve which will provide a restoring force as long as demand stays reasonable.
That's the key difference between this oil crash and previous crashes IMO. A much greater proportion of supply is higher up the cost curve. The Canadian oil sands are already well under, as are many of the US shale producers and deeper offshore projects.
Of course the Middle East is still chugging along with cash costs as low as $10/bbl and the risk of a sharp oil crash is not totally gone, particularly if the stress comes from weak demand rather than oversupply. But the steeper cost curve means oversupply cuts out earlier so the glut should be shallower and briefer. I don't think we'll see 15 years of $30/bbl like we did through the 90s.
DLS Price at posting:
69.0¢ Sentiment: None Disclosure: Not Held
STO Price at posting:
$7.27 Sentiment: None Disclosure: Not Held
WPL Price at posting:
$34.46 Sentiment: None Disclosure: Held
