While oil prices remain stubbornly low despite a pledge by OPEC to curb global output, the head of one U.S. conglomerate is eyeing a rebound that’ll bring crude back to $75 a barrel.
“What we’ve seen this year is a dramatic increase in production,” Jim Tisch, chief executive officer of Loews Corp., which bought the rest of Boardwalk Pipeline Partners LP it didn’t already own earlier this year, said on Bloomberg TV Monday. “Now oil is $50 a barrel, the shale producers are singing the blues again, and I think things are going to slow down.”
That’s due in part to break-even prices that Tisch said explorers are “under-quoting.”
With oil at $50 a barrel, “they can’t find oil and produce it profitably,” he said. Including overhead costs and land leases, producers need oil at about $75, according to Tisch. “They’re borrowing money, and they’re scraping along.”
To be sure, while $50 is a price that would have panicked U.S. drillers in the past, advances in fracking efficiency have brought down costs for some companies. ConocoPhillips said Monday it will maintain its level of capital expenditure while returning half its cash from operations to shareholders next year, assuming crude averages about $50 a barrel.
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