It’s a Shale World After All
While petroleum products have to adjust to tensions between Russia and Ukraine, spot product shortages in parts of the Midwest, and the possibility of improved relations between Japan and China, OPEC has other problems. The Organization of the Petroleum Exporting Countries (OPEC) has to adjust to shale oil production that continues to rock their world. OPEC’s market share is under attack and they have to act because it’s a shale world after all.
OPEC is in its own “World Oil Outlook” reported that the demand for its oil in 2017 may hit only 28.2 million barrels per day, the lowest level since the year 2000 a time before the China economic explosion and a time when oil was trading in the $20 and $30 range. It was also a time that forced OPEC to come together like never before and stop cheating on production levels and a time that began the most successful run in cartel history. Yet with predicting an 800,000 barrel a day drop in demand for their oil is going to present real challenges.
Shale oil is why we are in a price war. The U.S. shale producers may have started it but it is Saudi Arabia that wants to finish it. OPEC ministers know they are in a price war and as OPEC gets ready to meet Ali Naimi will be preaching patience and unity. He will try to resurrect the magic that saved the cartel from disaster in 2000. They will try to introduce a version of the “price-band” that worked somewhat in the last decade by vowing a production cut if oil falls below $70 a barrel basis the OPEC crude basket.