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Permalink Reply by David Allen Lilly on June 3, 2016 at 12:26am

I feel like the rebound has already begun, we have seen prices hold steady at close to $50 a barrel now, which is almost double the lows we saw several months ago.

When will it go higher ? Good question, my guess is that by the end of the year we will be hovering just shy of $60 a barrel and 2017 we will start bumping up to the high 60's to possibly the low to mid seventies.

Several things need to, and will, happen before prices recover higher than that and the timeline is a little harder to predict.

Consumption rising would help tremendously but our economy stinks because our government and especially our pathetic president don't know how to spur economic growth. China could get their act together too, and if our economy and theirs rebound in tandem their will be a huge bump in consumption which would......

Burn off the over supply currently holding prices back. I just don't see how prices rebound much farther with all the oil just sitting around waiting to be refined.

It wouldn't hurt if OPEC would quit cutting off their noses to spite our faces either. OPEC is committing economic suicide for themselves and much of the other petrol-states whose economies rise and fall almost solely on the money they receive for oil.

American shale oil is already on the path to reduced production and it seems illogical to me that other nations so dependent on oil revenue wouldn't join in to create a scenario with pricing more to their advantage.

So it is rebounding but the rest of the rebound may not come for a while yet.

But it will come. My curiosity is what happens to royalty statements once the infrastructure is in place to make more use of natural gas and to better process NGL's. A doubling of the price for natural gas could have a significant effect on our bottom line too.

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Permalink Reply by Gregory Wrightstone on June 3, 2016 at 10:52am

Looking to oil pricing for a sense of when rebound in Appalachia will occur is misguided. Bear in mind that there is virtually NO oil produced in either the Utica or Marcellus. All liquids are condensate, which commands about 1/2 of oil prices.

Both shale plays are driven nearly entirely by natural gas pricing and the liquid component provides additional revenue stream. Unless and until Nat Gas pricing is significantly improved there will not be a big uptick in activity.

My personal view is that we have barely scratched the surface of the Utica Gas potential and the Marcellus is only been exploited marginally, with lots of YUGE potential just waiting. This will keep a lid on pricing for many years.

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