Boy have things changed in a year. The price of oil collapsed over 60% from last summer’s $100 highs.
I was down in Texas this week, and spent some time in the Permian Basin of West Texas and Dallas before heading to Austin. Drilling has been cut back big time in response to falling prices. In fact the rig count in the Permian Basin has been cut in half. It was hard to find active rigs. Less production means less supply which should boost prices. It already has.
Crude oil rallied 25% in the month of April, and nearly 50% from the March lows. Layoffs have been rampant throughout the Energy patch across the country. But lower prices have been a major boost for American consumers and American manufacturing.
Production won’t pick up until the price moves even higher. That number is widely believed to be $75 amongst people I talked to this week.
My take, recent crude rally is a counter trend move. US Dollar correlation still strong. 2015 is a transitional year, and lows might be put to test again heading to Summer. Once final shakeout done, $65-75 will likely be norm for rest of decade.
Take a minute to watch this energy video which gives you more background on the industry. Enjoy it and let us hear your reaction by hitting the REPLY button. Look forward to hearing from you.
By: Mike Frazier