- oil price predictions bank on how quickly shale production resumes
- the challenges for shale producers in coming back up to speed is what led to the higher prices this spring
The success of the vaccines against COVID-19 did a lot to assuage fears, grow the economy globally and increase oil use this spring, sending prices sharply up. Yet, just how long this economic recovery and rising oil prices will continue is anybody’s guess says an article on Forbes.
Price fluctuations
Oil prices have certainly responded to a more normal economy: After West Texas Intermediate prices (a good gauge for US oil) bottomed out at $21 per barrel in March 2020, prices hit $74 in July 2021, and are now roughly $70. These price fluctuations are largely a result of the pandemic and resulting demand drop.
Crippled cash flow
The massive cuts that OPEC and associated countries (called OPEC+) took helped the markets recover some. However, the sub $40 price per barrel immediately crippled cash flow for many US shale producers, who operate on very slim margins. The pandemic basically put a clamp on shale production.
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Source: Forbes
