CHICAGO (Bloomberg) -- The Trump administration’s plan to slash corporate tax rates could free up more than $10 billion a year for U.S. oil explorers, opening new opportunities to boost drilling at a time of uncertainty in the marketplace.
Crude prices in New York have fallen 10% since the end of 2016 as added drilling in America’s shale fields offset an OPEC-led drive to raise prices by cutting production. The U.S. push has spurred concern that another price rout could be just around the corner, following a two-year decline that saw prices fall as low as $26.05/bbl in February 2016.
Republicans led by President Donald Trump have said they want to cut the top corporate rate to 15% or 20%, from 35% now. That could mean more than $10 billion in savings for oil producers that are one of the country’s most-heavily taxed industries, according to Bloomberg Intelligence research. The final number will hinge on whether drillers surrender other tax breaks in exchange, said Vincent Piazza, a senior analyst at BI.
“In theory,” explorers would divert tax savings to more domestic drilling, Piazza said in a telephone interview “But nothing is ever one-for-one.” WTI crude fell 0.2% on Monday to $48.47 after it hit a high of $55.24 on Jan. 3.
The number of rigs drilling U.S. fields for crude almost doubled to 617 since the end of May, when the full impact of the oil-market collapse shrank the fleet to a 6 1/2-year low, according to Baker Hughes. The oil rig count has advanced in 18 of the past 19 weeks as explorers coped with reduced cash flows by finding cheaper ways to pump each barrel from the ground.
U.S. drillers lifted crude production more than 3% since the end of 2016 to 9.088 MMbpd as of March 3, according to the Energy Department in Washington.
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Headline crude prices for the week beginning 12 November 2018 – Brent: US$71/b; WTI: US$60/b
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