Canadian natural gas prices have held up so well that the majors are taking strategic positions to prepare for an eventual demand spike. But the paydays could be delayed depending on the outcome of the Canadian federal election on Oct. 19. In this interview with The Energy Report, conducted on Aug. 26, Oil and Gas Investments Bulletin Publisher Keith Schaefer outlines the sectors that will profit first from a reversal in oil and gas prices, and what he is doing to position his readers for success.
The Energy Report: Oil prices continued to fall last month. What happened? Is this a problem of too much shale oil, too little demand from China or something else entirely?
Keith Schaefer: I think it has a lot to do with increasing shale production in the U.S. Production resiliency has surprised everyone. It surprised investors and lenders. It certainly surprised the Saudis. And it surprised the long oil speculators. We saw that nice pop back up to $60 a barrel ($60/bbl) after the initial collapse to $40/bbl in December/January. But as the rig count dropped and oil production failed to decrease, the longs have gotten discouraged.
The Street has realized that the Saudis are going to keep putting the pedal to the metal, Canadian heavy oil production cannot be turned off, and debt-laden producers in the States aren’t going to shut down existing production. We will continue to have excess supply for the foreseeable future.
TER: If rig counts are not a good indicator of future production, what signs will signal we are headed for a move up to sustainable prices?
KS: Rig counts have not been an indicator yet. Producers just keep finding new efficiencies, new technologies, new savings on service costs that allow them to continue pulling oil and gas out of the …read more