As the price of U.S. crude marches back toward $50-a-barrel territory, several big shale drillers are tiptoeing back into the oil patch, and that is making some energy experts nervous.
Devon Energy Corp. , Pioneer Natural Resources Co. and other prolific shale producers are telling investors that this fall they will pour more money into drilling new wells. The burst of activity shows the resilience of American energy companies that managed to survive oil’s plunge from over $100 a barrel in June 2014 to less than $30 earlier this year. But the burgeoning ramp-up threatens to cut the recent rally to $50 off at its knees.
Investors are scared there is little room in the market for all the new crude that is about to be unleashed by companies restarting their operations in Texas and Oklahoma. Federal data shows companies are already pumping more from each well, getting an additional 15 percent to 30 percent from new wells in some of the biggest shale fields.
This summer the U.S. oil price has whipsawed from more than $50 a barrel in June to below $40 earlier this month. In the past two weeks it has risen more than 20%, to a recent $48.22 a barrel.
Many have cut costs so deeply that they can turn a profit when oil trades around $50. That’s why a contingent of investors and analysts now see that price as a ceiling for the market.