Wilbur Ross, the investor who’s made billions betting on on-out-favor industries, is bullish on Texas oil after its recent tumble.
“We don’t think oil goes a lot lower than where it is on a sustained basis,” Ross, a turnaround financier and chairman of WL Ross & Co., said Oct. 21 at an event in New York.
Oil prices have declined in recent months with the U.S. benchmark price dropping to $79.78 a barrel on Oct. 16, the lowest since June 2012. The fall reflected worries that global growth was slowing as the U.S. supply surged from hydraulic fracturing of shale. If oil fell below $80 a barrel, low-cost producers would be least hurt, said Ross, whose firm is invested in Diamond S Shipping Group Inc. and exploration company Exco Resources Inc. (NYSE: XCO).
“The Permian Basin in Texas is not only the largest of the shale fields but also probably the lowest cost,” said Ross, referring to the source of more crude output than California and North Dakota combined. “We think they can make a 10% return on their investment even at prices below $60,” he said.
Producers in North Dakota’s Bakken formation have a break-even price closer to $80, he said. A steep fall would cause drillers there to shut production quickly, he said. Oil prices rose 0.3% on Oct. 22 to $82.75
Russia, certain Arab countries and Venezuela would also suffer, he said.
“Venezuela can’t afford to have much lower prices than now,” Ross said, adding that a further drop may cause Venezuelan bonds to default, a view echoed by Harvard University economists Carmen Reinhart and Kenneth Rogoff who warned last week that the country is almost certain to default on its foreign-currency bonds.
Ross spoke Oct. 21 at the New York Palace Hotel at an event co-sponsored by Canaccord Genuity Inc. and Youth I.N.C., a nonprofit organization that helps charities raise money for disadvantaged youth.
Recommended Reading
Hedge Funds Retreat from Oil as War Risk Fades: Kemp
2024-04-29 - Hedge funds and other money managers sold the equivalent of 95 MMbbl in the six most important petroleum futures and options contracts over the seven days ending on April 23.
Exxon’s Guyana Gas Project a “Win-Win,” Set for Hook-up by Year-end ‘24
2024-04-28 - Exxon Mobil Corp. CEO Darren Woods said the company’s gas-to-power project in Guyana is a “win-win proposition particularly for the people of Guyana” when completed and hooked-up by year-end 2024.
Segrist: The LNG Pause and a Big, Dumb Question
2024-04-25 - In trying to understand the White House’s decision to pause LNG export permits and wondering if it’s just a red herring, one big, dumb question must be asked.
Texas LNG Export Plant Signs Additional Offtake Deal With EQT
2024-04-23 - Glenfarne Group LLC's proposed Texas LNG export plant in Brownsville has signed an additional tolling agreement with EQT Corp. to provide natural gas liquefaction services of an additional 1.5 mtpa over 20 years.
EIA: Oil Prices Could Move Up as Global Tensions Threaten Crude Supply
2024-02-07 - Geopolitical tensions in the Middle East and ongoing risks that threaten global supply have experts questioning where oil prices will move next.