OPEC Will Blink First

[SAYIT]

According to a poll of Bloomberg subscribing analysts, traders and investors, 49% believe the Organization of Petroleum Exporting Countries will have to lower its production target this year because US frackers will not stop pumping. 34% said shale drillers will lower output in time to save OPECers the trouble. Seventeen percent weren’t sure. In other news, Algeria is considering increasing it's oil output in order to make up for falling revenues, a move certain to tempt other OPECers to increase their output which will precipitate another round of oversupply and price cuts. Look for the $1/gal gas coming to a station near you this spring or summer.

OPEC Will Blink in Battle With U.S. Shale Drillers Poll Shows - Bloomberg

 

[Mad Scientist]

I think the House of Saud is going after Iran and Russia, US shale is just "collateral damage".

 

[SAYIT]

I think the House of Saud is going after Iran and Russia, US shale is just "collateral damage".

US frackers aren't victims but rather active participants in what I hope is a concerted effort to bring both Russian military adventurism and Iran's terror industry to heel. The excellent fringe benefits include the neutering of OPEC and the boost given both the American and global economies by cheaper oil products.

 

[waltky]

Opec has limited room for manoeuvre...

Opec oil deal unlikely as producers discuss price pain
Wed, 01 Jun 2016 - As Opec members gather in Vienna, internal differences and global oil supply problems outside their control mean collective action to bolster prices appears unlikely.

Energy ministers from the oil exporters' group Opec gather in Vienna on Thursday for their regular discussions on oil prices. They have a problem. The price of crude oil is too low for (their) comfort. In the past, Opec has taken action in similar circumstances, cutting production in an attempt to drive prices higher. But in this current episode of relatively cheap oil, Opec has been unable to agree any action. Here is Opec's problem: oil is now trading at about $50 a barrel for Brent crude - a UK type of oil that is widely used as a benchmark. That's less than half the level it reached in June 2014.

The current price is well up from the lows it hit in January of about $27, but it is still low enough to be a problem for Opec members. For most of these countries oil is the main source of government revenue. Focusing on oil exporters in the Middle East and North Africa the IMF said in a report in April: "The fiscal adjustment [in government spending and taxation] needed to absorb the oil price shock is unprecedented." Last year, the IMF says, export revenues for this group of oil suppliers fell by $390bn (£266bn), equivalent to 17.5% of their national income, or GDP.

Shale pressure

So why the inaction on Opec's part? Why have they repeatedly failed to agree on collective action to address what is a problem for them all? When Opec has cut production in the past, it has generally been Saudi Arabia, the group's biggest oil producer, which has made the most substantial moves. The kingdom has been called the swing producer - the one whose decisions are most capable of turning the market round. This time Saudi Arabia has been reluctant to act alone. Yes, it would prefer higher prices, but it does see a silver lining, some benefit from the weakness in the market.

Cheap oil generates pressure on American shale oil producers. That is an industry that has grown rapidly in the last decade, and it is the major factor behind plentiful supplies of oil that drove prices down from the 2014 high. Back in April, it did look as though Opec, together with a few other oil producers (including Russia) were finally going to do something to underpin oil prices. Not full-on cuts in production, Opec's traditional price weapon. They were discussing a more modest step, an agreement not to increase output - a production freeze as the idea was called at the time.

Saudi-Iran relations