The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and rival oil exchange traded products have recently been showing signs of life, but oil futures still have a lot of work to do to reach price points that will truly excite financial markets.
Advances in U.S. shale oil production technologies are contributing the to supply surplus and weighing on any oil price gains. It has become much cheaper for the upstart U.S. shale producers to extract oil out of the ground, but the growth rate of U.S. oil production has also recently slowed.
“Lower global production costs, considerable U.S. shale growth potential and shale’s ability to quickly respond to changing market conditions should keep average annual oil prices below USD60 a barrel in the long term,” said Fitch Ratings. “But oil prices will remain volatile and could periodically exceed our assumptions.”
While OPEC is cutting back to alleviate price pressures, U.S. fracking companies could jump to capitalize on the windfall as crude oil prices jump back above $50 per barrel – according to some estimates, shale oil producers can get by with oil at just over $50 per barrel due to advancements in technology and drilling techniques that have helped cut down costs.