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Friday, September 11, 2015

OPEC Plan Now Seen as Success as IEA Forecasts Dropping U.S. Oil Production

From CNN Money:
The Saudi-led cartel's master plan to pump record amounts of oil in order to squeeze other producers out of the market appears to be working. 
"The strategy...appears to be having the intended effect of driving out costly, 'inefficient' production," the International Energy Agency said Friday in its monthly oil market report. The IEA monitors energy market trends for the world's richest nations. 
The agency said OPEC's rivals such as the U.S. and Russia will see the biggest decline in oil output next year since the collapse of the Soviet Union. 
Non-OPEC production will drop by nearly 500,000 barrels a day in 2016, the agency said. It singled out the U.S. shale oil industry as the biggest loser, forecasting that output will fall by 400,000 barrels a day next year. 
By contrast, demand for OPEC oil is expected to rise.
Continue reading that article here.

The Wall Street Journal also took a look at the implications of the IEA forecast, and came to a similar conclusion:
The agencies's predictions are among the gloomiest for American oil production to emerge since US crude prices crashed last month to less than $ 40 a barrel for the first time since the financial crisis, before recovering to about $ 45 a barrel. But US government forecasters this week also predicted a sharp drop in American oil output over the coming 12 months, before beginning to rebound next fall. 
With the rise of hydraulic fracturing techniques to extract crude from shale formations in recent years, the US had become one of the world's top three oil producers, along with Saudi Arabia and Russia. Newly low oil prices present challenges to US producers who had shown unexpected Resiliency when the market collapsed last year, the IEA said. 
"US oil production is likely to bear the brunt," said the Paris-based agency, which advises some of the world's largest oil consumers. 
And the IEA noted that any US decline could give OPEC-led by Saudi Arabia, the world's largest crude exporter-more leverage over the market in 2016. The producer group may boost its output next year as a result, the IEA said.
Read that whole article by clicking here. 

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