Wednesday, October 21, 2015

After Year of Pain, OPEC Close to Halting U.S. Oil in Its Tracks

Saudi Oil Minister Ali Al-Naimi
Grant Smith writes:
OPEC abandoned its traditional role of paring production to prevent oversupply last November as a tide of new oil from the U.S. eroded its share of world markets. The group chose instead to keep pumping, allowing the subsequent price slump to squeeze competitors with higher costs. Its representatives will meet in Vienna Wednesday with non-member countries including Russia for technical talks.

The plan appears to be working. Oil remains 33 percent lower than when OPEC revealed its strategy on Nov. 27, trading for $48.46 a barrel in London at 5:28 p.m. Tuesday. U.S. crude production has retreated about 500,000 barrels a day from the three-decade peak reached in June to 9.1 million a day in the week to Oct. 9, according to data from the Energy Information Administration.

The losses will accelerate next year with a drop of 390,000 barrels a day in annual average production to 8.86 million barrels a day, according to the EIA. OPEC’s fortunes will improve as the U.S. declines, with the IEA predicting demand for the group’s crude climbing to 31.1 million barrels a day next year from 29.3 million in 2014.

“Their strategy is still working for them,” said Miswin Mahesh, an analyst at Barclays Plc in London. “It means pain now, but in the medium-to-long term they will reap the fruits of a more balanced market, moderated shale supplies, growing demand for oil and ultimately a higher price.”


  1. Isn't it great to have "allies"? We give them hundreds of billions not to mention saving their sorry asses from the Iranians. What do we get in return: the systematic destruction of the US oil industry.

  2. Will this be the one case of price gauging that actually works?

  3. This makes me wonder, will this strategy actually work in the long run for OPEC? It's not like the shale tech has been destroyed. If the price of oil goes up won't that just mean shale will ramp up again? It was the high price of oil which spurred the US shale industry in the 1st place...why wouldn't that just happen again?