Could Policy Shifts Boost U.S. Energy Output?
By Erik Norland

However, prices were trading around $70 per barrel on WTI as of mid-January – not much higher than the cost of production. Depending on the area, cost of production can range from $40 to $65 per barrel for most fracking entities. 

NYMEX WTI and Oman crude oil

While oil prices are higher than the cost of production, they’re not so much higher that it will necessarily incentivize a great deal of additional production, unless crude prices rise further still.

Natural Gas

The natural gas market has been booming for years. The U.S. began to export LNG in 2016, which began the process of transforming the Henry Hub benchmark from a North American benchmark into a global benchmark. The new administration is lifting some restrictions on developing further LNG export facilities, which could deepen and broaden Henry Hub’s role in the world. While the January cold snap in the U.S. did cause a rally in Henry Hub natural gas prices, those prices remain low compared to prices in Europe and Asia.

henry hub front month prices

As such, Europe and Asia could remain strong sources of demand for U.S. natural gas for many years to come.


About the author

Erik Norland
Erik Norland, Executive Director & Chief Economist, CME Group

is responsible for generating economic analysis on global financial markets by identifying emerging trends, evaluating economic factors and forecasting their potential impact on CME Group's various asset classes, ranging from interest rate products to energy and agriculture. He is also one of CME Group’s spokespeople on global economic, financial and geopolitical developments.

 

 

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