‘Negative ripple effects’
The rally in crude oil has been red hot. In the three weeks since February 11, WTI shot up a short-crushing 34% to $34.69 a barrel at the moment. Now the talk in the oil patch is at what price these desperate shale oil drillers will once again increase production.
Continental Resources CEO John Hart and Whiting Petroleum CEO Jim Volker told analysts this week that they’d step on the accelerator once oil reaches the $40 to $45 range. After all, drillers have to produce oil to be able to service their mountain of debts. They can’t just switch to selling T-shirts.
Alas, that looming increase in production won’t help deal with the glut. And a glut it is.
Dallas Fed President Robert Kaplan hammered this home as part of a wide-ranging speech today. And he wasn’t speaking only for himself or stating his own wayward opinion. Instead, he started out his comments concerning oil with this: ‘It is our view at the Dallas Fed that….’ So this is official.
This post was published at Wolf Street by Wolf Richter ‘ March 3, 2016.
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