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Shock, Horror: Falling Oil Prices May Slow Shale Boom

Michael Casey, Fortune

As oil prices keep falling, some are suggesting that shale oil producers may start rethinking their expansion plans for 2015 and even cutting back on the numbers of rigs they deploy.

With oil prices falling and energy stocks getting battered, the days of the shale boom might be numbered.

Most analysts predict that companies will stay the course for the short-term as prices of West Texas Intermediate crude, the U.S. benchmark, briefly dipped below $85 Friday before recovering to $86. In June, a comparable barrel cost as much as $105.

But if oil prices fall below $85 and remain there for several months, analysts predicted companies would start taking a hard look at next year’s drilling plans. Should they fall below $80, then mid-sized and small producers may cut back their spending and suspend some of their operations.

“If it falls below $80, the companies start having the conversation of slowing down their drilling activity,” said Daniel Katzenberg, an analyst with Robert W. Baird. “It would have to be there for several months for them to actually follow through and reduce drilling plans.”

David Pursell, managing director at advisor Tudor Pickering. Holt & Co. concurred that $80 is a point when U.S. oil industry may start reassessing its shale production. It would unlikely have any impact on the big oil companies like ExxonMobil  because most of their projects are planned far in advance.

At the moment, the industry is expected to continue ramping up production.

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