Posted on 10/29/2014 4:57:19 AM PDT by thackney
Opec is likely to let the price of oil slide further as it gambles that US shale oil producers will be forced to slow production first.
The oil cartel, which includes a number of Persian Gulf states, as well as Nigeria and Venezuela, has remained silent as oil prices have tumbled over recent months. Some analysts have predicted the oil producers club will decide to reduce production at its next meeting, scheduled for November, in a bid to maintain price levels at around $100 a barrel.
Yet, with a barrel of crude oil currently at $82.37 (£50.90, €64.69), the member states have so far shown no public sign that production will be cut.
In fact, it seems likely that production levels will be maintained. Signs from the world's biggest producer, Saudi Arabia, released anonymously to carefully selected journalists, suggests that the kingdom is happy to let prices slide. It seems that Saudi and other Opec members look to be content with guarding their market share from rival producers, the biggest threat being posed by US shale companies.
The rise of US shale oil production has altered the dynamics of the global oil trade, perhaps irrevocably. US shale has entered the market at a time when prospects for global economic growth are particularly grim. The Eurozone has shown signs that even with unprecedented assistance from central banks, a prolonged period of stagnation awaits.
Meanwhile, China's economy is showing signs that decades of runaway economic growth are a thing of the past and it has entered a period of slowdown. Recent data from the country's National Bureau of Statistics showed the country's economy had just grown at its slowest rate since the 2008 global financial crisis.
The US economy may have shown some signs of recovery in recent months, with GDP set to increase by around 2.8% this year, but it is still reliant on massive support from the Federal Reserve. Moreover, the domestic shale boom has seen the US importing less oil from overseas. Oil imports are down from a 2005-2006 high of 10 million barrels of per day (bpd) to around 7 million bpd in 2014.
Against the backdrop of relatively weak global demand for oil, rising shale production has distorted the well-established energy flow networks. US shale production has risen by 500,000bpd since the summer and is expected to push 10 million bpd by the end of 2015.
While much has been written about Opec's falling pricing power in the face of the US shale boom, Opec producers could withstand lower oil prices than US producers.
Analysts are divided over what price level would cause US producers to reduce output. While prices of around $80 to $90 a barrel may not hurt US shale producers that are already running, they would affect investment in the industry.
Citigroup has forecast that prices would have to fall as low as $50 a barrel in order to stop production growth. However, Goldman Sachs suggested that oil production could slow if oil prices were to fall by another 10%.
"US shale is the marginal swing barrel in the new order," Goldman said in a report, adding that production could slow down if prices of WTI hit $75 a barrel.
Opec is a diverse group of oil producers with vastly differing abilities to withstand a prolonged period of low oil prices. Whereas Saudi Arabia could fulfil its current budgetary requirements with prices at $89 a barrel, fellow member Iran requires prices closer to $130 a barrel, Libya requires prices of around $185 a barrel, while Venezuela needs a price of around $161.
Despite the economic difficulties in Tehran and Tripoli, Opec is unlikely to cut production in a bid to raise prices, as the fear that US shale gas would grab part of the market in the interim outweigh any short-term pain.
For its part, Goldman Sachs does not expect Opec to reduce its production levels until US production has already slowed.
"Any near-term Opec production cut will be modest until there is sufficient evidence of a slowdown in US shale oil production growth," it said.
If we had a working Congress and a new President - an actual American Conservative... then Laws could be passed making it a national requirement to become as energy independent as possible... a super strong effort from top to bottom to use CNG/LNG as automotive fuel... as made from natural gas - the main product of fracking... And to make it a national emergency to allow fracking in every state that had such reserves... with penalties of withholding federal funds for not participating ... In a few short years America would be dictating International Energy Prices... by sheer volume... Take note in many Asia Countries today every other vehicle is CNG/LNG and the rest are diesel - which can run on CNG/LNG with the correct alternate fuel metering system for dual fuel... Run nearly all domestic vehicles on natural gas based fuels and the U.S. nearly bankrupts the Mid East and other nasty opponents. And amazing enough it can be done with real protectionist energy policies and proper use of technology in use today ... nothing new needs to be invented. ITS THE POLICY - STUPID!!!
What we do not need, is more government laws and interference in the industry.
We need the government to quit putting up roadblocks and unreasonable regulations. We don't need their "help", we need them to get out of the way.
The most terrifying words in the English language are: I’m from the government and I’m here to help.
- Ronald Reagan
in many Asia Countries today every other vehicle is CNG/LNG and the rest are diesel
- - - -
What Asian Countries are fueled by 50% Natural Gas?
Fischer Tropsch: If America is truly the “Saudi Arabia of Coal” then this is a great way to produce diesel. If jus
I might be convince of going along with your proposal, but we all know that neither of the items you listed would get anything more than token funding.
A government that can do FOR you can do TO you in equal measure.
It’s not the government’s business to take sides in what kind of vehicle I buy. Or make, for that matter. By conceding government action here, you concede to let government direct the hand of the market.
The free market is only free if it’s free from interference.
No. Your ideas might be rationale, but your plan of implementation by government force and decree not only negates any positive, it turns your idea into a net negative. Not just a negative, it would be a disaster.
I remember hearing a while back that Raytheon was developing technology to extract oil shale at a much cheaper cost. What’s the per barrel extraction costs these days?
There are Democrat Controlled states that are blocking fracking — do you want energy independence or tolerance for liberal - greenie Democrats ... Can’t have both ...
Juvenile minds have to let go of resistance to states banning such things as fracking ... nothing of this sort would have been allowed in WWII ... a National Priority — become totally energy independent and then DICTATE to Mid East Islamic countries — it is PRAGMATIC not nicey nicey
When the current government is blocking free enterprise in oil exploration ...then it becomes a new government to unblock it or everything remains the same as it is now...
As new President in 2016 would you allow a STATE to block the Keystone Pipeline and preserve the blockage of plentiful oil to refineries in Texas and Louisianan? You would ... Okay then we can call you obama junior...
One state cannot be allowed to cripple an national energy economy — Purists on energy policy will kill America and that is what we have now
I support the tenth amendment to our constitution, personal insults aside. I do not support the Federal Government taking any power they think they need.
Coal should be unleashed in America ... striving at ever level to keep it clean as possible ....
But for you purists -— if one state like WVA or Kentucky would fall into the hands of Liberal Democrats and you are the Majority leader in the House or the Senate or the President are you going to let ONE Democrat State Block the use of clean coal to help insure energy independence ? You are - are you ... then change your name to Obama.
If there is an economical way to produce diesel or a diesel compatible fuel - would you as a states rights purist going to allow ONE state to block it ... then rename your child to obama jr.
Don’t confuse oil shale, with shale oil.
I know, lousy names for the difference.
Oil shale is a solid. The petroleum, kerogen, has to be be cooked or retorted from it. It is then processed to be a synthetic crude. We do not have commercial production of oil shale in the US.
Shale oil, or crude oil from a shale play like the Bakken, Eagle Ford, etc is what is fueling our growth in oil production. Prices vary with fields. Prices vary from well to well within a field. There are sweet spots and marginal locations.
All that said:
Bernstein Research said this week that about a third of U.S. shale production would be uneconomical if oil prices were to fall to $80 per barrel.
MORNINGSTAR INC Our analysis suggests that the average breakeven for our E&P coverage is $70 per barrel
ROBERT W. BAIRD EQUITY RESEARCH
“We estimate $73 as the weighted average breakeven point for U.S. supply.”
Eagle Ford Liquids Rich $53
Wolfcamp North Midland $57
Bakken Core $61
Niobrara Extension $64
Eagle Ford Oil $65
Niobrara Core $68
Wolfcamp South Midland $75
Bakken Non Core $75
Texas Panhandle $81
Mississippi Lime $84
Barnett Combo $93
Several more at:
http://www.reuters.com/article/2014/10/23/idUSL3N0SH5N220141023
I should have added, don’t take these numbers as solid facts, but rather educated guesses by investment analysts.
For example, from that same link.
UBS INVESTMENT RESEARCH
EAGLE FORD $43.34
GOLDMAN SACHS
EAGLE FORD $80-$90
I would argue that local production has more staying power in the market then overseas due to logistical charges.
They may be able to offset with volume, but I think we may have gotten to the point now that we have enough of our own production to greatly reduce if not prevent the potential of them using this against us.
Cost of moving oil last year from Iraq to the US was $3.42/barrel.
F.O.B. Costs of Imported Crude Oil for Selected Crude Streams
http://www.eia.gov/dnav/pet/pet_pri_imc2_k_a.htm
Landed Costs of Imported Crude for Selected Crude Streams
http://www.eia.gov/dnav/pet/pet_pri_land2_k_a.htm
Not the importance factor today as it was when oil was under $20.
??????
we have enough of our own production to greatly reduce if not prevent the potential of them using this against us.
The US is importing 7~7.5 MMBPD a day of crude oil, 3~3.4 MMBPD from OPEC.
http://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_epc0_im0_mbblpd_m.htm
So unless we are willing to abandon the constitution and declare ourselves king, we are no different than Obama.
Buddy, I think you are greatly confused.
What do you think will happen to OPEC when ISIS takes control of all Iraqi oil. Noe that I said when, not if. Obama is going to let it hapen
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