Shale oil boom leading to high supply, lower demand and rapidly decreasing prices

The oil shale boom is so great that it might end up being bad for business. With record amounts of oil being drilled, supply is high, demand is down and prices are falling to a point that threatens to reduce future drilling, Isaac Arnsdorf reports for Bloomberg. (Bloomberg photo by Eddie Seal)

"Domestic fields will add an unprecedented 1.1 million barrels a day of output this year and another 963,000 in 2015, raising production to the most since 1970, according to the U.S. Energy Information Administration," Arnsdorf writes. "The Energy Department’s statistical arm forecasts consumption will shrink 0.2 percent to 18.9 million barrels a day this year, the lowest since 2012."

"More supply from hydraulic fracturing and horizontal drilling—and less demand—are contributing to the tumble in West Texas Intermediate crude," Arnsdorf writes. "The U.S. benchmark is down 18 percent since June 20 and fell below $90 a barrel on Oct. 2 for the first time in 17 months."

Ralph Eads, vice chairman and global head of energy investment banking at Jefferies LLC, which advised 38 percent of U.S. energy mergers and acquisitions this year, said in an interview, “If prices go to $80 or lower, which I think is possible, then we are going to see a reduction in drilling activity. It will be uncharted territory.” Prices today were at $87.39 a barrel on the New York Mercantile Exchange and $87.87 in London. (Read more)