Executive Summary
Oil prices increased over the last twelve months from $38/bbl at March 31, 2016 to $50/bbl at the end of the first quarter 2017. Over the last couple years many companies postponed exploration activities and cut capital projects to drill new wells because of the depressed oil prices. Oil prices have now settled around $50/bbl and producers are working to cut costs and increases efficiency in this new oil price environment. While production has increased across the U.S., producers are still being cautious.
OPEC agreed to cut production by 1.2 million barrels of oil per day starting January 1, 2017. As of the end of the January, OPEC’s 13 members have generally complied with production cuts (achieving 82% of the pledged cuts) and Russia also held up their end of the deal.
During CERA week in Houston, OPEC explained their plans to extend the cuts past the June expiration date. However even if OPEC maintains production cuts, rising U.S. shale oil output is thought to temper the results of OPEC’s reduction in supply.
As oil prices stabilized somewhat around $50 per barrel, the number of oil and gas companies filing for bankruptcy declined. Only 7 oil and gas companies went bankrupt in the first quarter of 2017 compared to 17 in the first quarter of 2016 and 70 total in 2016.
