Mouse Over to Stop Rotation & Read Ad

Monday, October 16, 2017

OPEC Urges Shale Drillers to Do Fair Share to Control Oil Market

From the Motley Fool:
The Secretary General of OPEC, Mohammed Barkindo, has a message for shale drillers. Speaking at an energy forum in India, he said, "We urge our friends in the shale basins of North America to take this shared responsibility with all the seriousness it deserves, as one of the key lessons learned from the current, unique supply-driven cycle." In other words, start sharing some of the responsibility to help keep excess supply off the market. 
His plea comes as U.S. output has staged a remarkable comeback this year and is on pace to break the 1970 record of 9.6 million barrels per day by next year. However, the message will probably fall on deaf ears, since shale drillers aren't beholden to OPEC but shareholders. So the only way for OPEC to get its message across would be to take away the one thing shale drillers need to keep drilling, which is a stable oil price -- that is, unless shareholders persuade them to use their money for something other than drilling more wells. 
How we got here 
The oil market is still trying to get back on its feet after a blistering downturn caused by a gusher of new supplies, primarily from U.S. shale drillers, that flooded the market in recent years. OPEC initially responded by unleashing its own torrent of oil, which it hoped would drown out weaker shale drillers. However, instead of killing that emerging industry, it has only made shale stronger, because good old American ingenuity drove out costs through efficiency gains and innovation. Consequently, many shale drillers are now thriving at $50 crude. 
That's a problem for OPEC, because it's trying to rebalance the oil market by coordinating a production cut to drain excess inventory. While those oil stockpiles have fallen this year, they haven't come down as quickly as hoped, because shale drillers promptly ramped back up.
Continue reading by clicking here.

Connect with us on Facebook and Twitter!

No comments :

Post a Comment

Follow by Email