US Oilfields Ramping Up Production

As oilfield workers for Lilis Energy Inc LLEX.O threaded together drill pipes one recent morning in the Permian Basin, a bulldozer cleared sagebrush to make way for the company’s fifth well since January.

Lilis aims to expand production sevenfold this year in America’s most active oilfield.

The whir of activity is all the more impressive after the small firm nearly collapsed in late 2015 – amid unrestrained production from the Organization of the Petroleum Exporting Countries (OPEC). As per-barrel prices plummeted, Lilis piled on debt and struggled to pay workers.

Now – with prices higher after a November OPEC decision to cut output – Lilis can’t grow fast enough.



Such resurrections are common these days in the Permian, which stretches across West Texas and eastern New Mexico. They tell the story of the U.S. shale resurgence and the quandary it poses for OPEC as it struggles to tame a global glut.

Surging U.S. production has stalled OPEC’s effort to cut supply. Inventories in industrialized nations totaled 3.05 billion barrels in February – about 330 million barrels above the five-year average, according to the International Energy Agency.

The Permian boom will be high on the agenda as OPEC oil ministers begin gathering in Vienna ahead of a May 25 policy meeting to decide whether to extend output cuts.

In the long term, too much U.S. output could spur OPEC to open the spigots again – setting off another price war – but for now its member nations’ need for revenue makes that unlikely.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza