A SHALE-OIL BOOM TOWN CLIMBS BACK FROM BUST
The downturn in oil took a bite out of the U.S. production but now oil drillers are inching back to action in North Dakota’s Bakken shale region, writes the Wall Street Journal’s Erin Ailworth.
The tentative recovery in the oil market is leading producers to venture beyond fields in Texas and Oklahoma, where production is cheaper because there is more oil that is easier to tap.
“Hess Corp., Continental Resources Inc. and Oasis Petroleum Inc. are drilling new wells [in the North Dakota region] or finishing ones earlier left uncompleted. Yet despite technological improvements and cost cutting, only some producers can afford to drill in the Bakken at today’s oil prices,” the Journal reports.
The Trump administration’s pro-energy policies are also yielding results.
Places such as Watford City, a community of about 6,400 people, that was booming just a few years ago, is expected to get a boost from the June 1 start-up of the Dakota Access Pipeline.
However, there are a few clouds on the horizon.
Industry professionals worry that another boom cycle might bring too much oil online and depress crude prices. Producers also struggle with the cost of prospecting for oil in the region.
Despite the improvements in shale oil drilling technology and cost-cutting measures, only some producers can afford to drill in the Bakken at today’s oil prices.
Crude prices remain volatile—crude has declined 9% in the past three weeks, slumping below $50 a barrel.
“While some Bakken producers can break even at $40 oil, according to consultancy Wood Mackenzie, most need upwards of $50 and wouldn’t significantly increase activity until oil approached $60,” the Journal reports.
GOLDMAN’S GREEN PUSH COMES WITH A GREEN TWIST
Goldman Sachs Group Inc.is betting on green energy, writes Liz Hoffman.
On Monday the bank said it has agreed to buy 68 megawatts of electricity from a wind farm in Scranton, Pa. The plant will come online in 2019.
“ It is the first such agreement struck by a bank, according to trade group Business Renewables Center, and pushes Goldman closer to its goal of procuring 100% of the energy it uses from renewable sources by 2020,” the Journal reports.
The wind farm is owned by NextEra Energy Inc., and would produce power equivalent to Goldman’s usage across its North American facilities, said Cindy Quan, who runs Goldman’s real estate sustainability efforts. Goldman currently gets 90% of its power from green sources, mostly by buying “credits” created by other projects.
The green project is also part of a push for Goldman to catch up to its rivals and expand its presence in the lucrative energy trading business.
Citigroup and Morgan Stanley have already made investments in the renewable energy space.
“Commodities trading has been a tough business across Wall Street since the financial crisis due to stricter capital rules. It was among the businesses that Goldman blamed for disappointing trading revenues last quarter,” the Journal reports.
Goldman currently has a division which aims to connect corporate buyers of electricity with developers.
Oil prices on Tuesday built on Monday’s modest gains, supported by reports that Saudi Arabia will cut its supplies to Asia and the U.S., even as investors remain skeptical that production cuts led by Middle Eastern producers and Russia are helping to alleviate a years-long market glut.
Brent crude, the global oil benchmark, rose 0.5% to $48.53 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were trading up 0.5% at $46.31 a barrel.
On Monday, oil retraced a bit of last week’s near-4% decline, helped by Saudi Arabia’s energy minister expressing confidence that market rebalancing will soon gather steam and reports that the country would cut its exports to Asia and the U.S. in July. Seasonally Saudi Arabia’s exports are lower over summer when its domestic demand for power peaks.