Balancing Oil Supply…The Organization of Petroleum Exporting Countries’ abiility to balance global supply (and prices) now limited by shale oil production, a former Qatari energy minister said.
OPEC was able to balance the market in the past because because shale oil deposits and other non-OPEC nations output was insignificant, Abdullah bin Hamad told reports at the industry even in Doha.
“OPEC can’t act as swing producer because it will lose market share,” said Al-Attihay former Qatar energy minister.
Crude prices tumbled more than 75% from the 2014 peak due to the global glut in part due to U.S. shale oil production.
Market Forces…“Frankly, I don’t expect anything from the next OPEC meeting because OPEC decided not to play against the market,” IEA former executive. “Market forces are too strong now, and you can’t play against those forces whey they are strong.”
“Just cut production by 1.5 million barrels a day and the next day the prices goes up and the other oil producers will take the whole share–there is no benefit for OPEC in that,” Al-Attiyah.
Crude Oil Outages Soaring…Escalations in sabotage, tech problems, and natural disasters are impacting world crude oil supply as documented by the EIA in the above diagram for the last 12 months. This increase in outages most likely are a factor in the recent oil price increases to $50 a barrel.
In Summary…The closer a market looks and acts like an oligopoly (a state of limited competition,) the greater the pricing power those producers have by limiting production. The good news is the pricing power has shifted away from OPEC to where now the market as a whole is determining pricing. From a U.S. national security perspective, we are more secure now due to this shifting of market pricing power.
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Source: “Shale Oil Seen Stifling OPEC’s Classic Market-Balancing Act,” Wael Mahdi, Bloomberg, May 256 2016