In the economics of petroleum extraction, the term shale band refers to the range of global oil prices that can support current levels of United States

shale oil extraction Shale oil extraction is an industrial process for unconventional oil production. This process converts kerogen in oil shale into shale oil by pyrolysis, hydrogenation, or thermal dissolution. The resultant shale oil is used as fuel oil or up ...

via hydraulic fracturing techniques.

Price range

The term was defined on May 8, 2015 by Olivier Jakob, the director of Petromatrix, a Swiss-based consultancy company that publishes a daily note on the oil markets. Petromatrix described the shale band as a price range between $45 and $65 per barrel for

West Texas Intermediate West Texas Intermediate (WTI) is a grade or mix of crude oil; the term is also used to refer to the spot price, the futures price, or assessed price for that oil. In colloquial usage, WTI usually refers to the WTI Crude Oil futures contract tr ...

(WTI) crude oil. Below $45 per barrel, production of US shale oil would fall sharply, and above $65 production would surge. According to Olivier Jakob, the price of crude oil would, therefore, remain within that range as long as the US remained the

swing producer A swing producer or swing supplier is a supplier or a close oligopolistic group of suppliers of any commodity, controlling its global deposits and possessing large spare production capacity. A swing producer is able to increase or decrease commodit ...

of crude oil in an environment where OPEC is producing at capacity. The concept of the shale band was subsequently verified in the market action of 2015 and the Wall Street Journal characterized the shale band as one of the key terms and phrases from 2015. The term is now widely used in by the financial press and market analysts to describe the price action of oil during over the year of 2015 and 2016. The price reference used by Petromatrix for the shale band is based on the CME WTI

futures contract In finance, a futures contract (sometimes called a futures) is a standardized legal contract to buy or sell something at a predetermined price for delivery at a specified time in the future, between parties not yet known to each other. The asset ...

for the month of December of the next calendar year, a contract also known as the Red December contract. Due to cost reductions taken by US shale oil producers, Olivier Jakob revised the shale band in August 2016 lower by $5 per barrel to a range between $40–$60, on the basis of the WTI December contract for the next calendar year.

References

{{Petroleum industry Economic theories Petroleum production Hydraulic fracturing