Meanwhile, the lower oil prices will have a significant negative effect on the U.S. oil industry, creating a more cyclical market. Goldman believes that a $80 per barrel WTI crude is the threshold where reinvestment rates become unfavorable in U.S. energy. [Investors Return to Oil ETFs]
Recently, Citigroup argued that “full-cycle” costs, which include land, infrastructure, well drilling and operating costs, for new shale projects require oil prices of at least $70 to $80 per barrel, reports Bob Pisani for CNBC.
Consequently, hydraulic fracturing and oil services companies could feel the brunt of the pain in a low oil price environment. For instance, the Market Vectors Unconventional Oil & Gas ETF (NYSEArca: FRAK) has declined 21.5% over the past three months while the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEArca: XOP) has dropped 26.0%. [Fracking ETF Frustrated by Tumbling Oil Prices]
United States Oil Fund
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