Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
China's Grand Plan to Take Over the World - 19th Nov 19
Interest Rates Heading Zero or Negative to Prop Up Debt Bubble - 19th Nov 19
Plethora of Potential Financial Crisis Triggers - 19th Nov 19
Trade News Still Relevant? - 19th Nov 19
Comments on Catena Media Q3 Report 2019 - 19th Nov 19
Venezuela’s Hyperinflation Drags On For A Near Record—36 Months - 18th Nov 19
Intellectual Property as the New Guild System - 18th Nov 19
Gold Mining Stocks Q3’ 2019 Fundamentals - 18th Nov 19
The Best Way To Play The Coming Gold Boom - 18th Nov 19
What ECB’s Tiering Means for Gold - 17th Nov 19
DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets - 17th Nov 19
Dow Jones Stock Market Cycle Update and are we there yet? - 17th Nov 19
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19

Market Oracle FREE Newsletter

$4 Billion Golden Oppoerunity

Saudi Arabia Continues To Turn Screws On U.S. Oil Shale

Commodities / Crude Oil May 13, 2015 - 03:36 PM GMT

By: OilPrice_Com

Commodities Saudi Arabia continues to ratchet up production, taking market share away from U.S. shale producers.

According to OPEC's latest monthly oil report, Saudi Arabia boosted its oil output to 10.31 million barrels per day in April, a slight increase over the previous month's total of 10.29 million barrels. That was enough for the de facto OPEC leader to claim its highest oil production level in more than three decades.



Saudi Arabia has increased production by 700,000 barrels per day since the fourth quarter of 2014 in an effort maintain market share. The resulting crash in oil prices is forcing some production out of the market, and Saudi Arabia intends for the brunt of that to be borne by others.

There is a lag between movements in the oil price and corresponding changes in production. OPEC says there was a 23-week time lag between the fall in rig counts and the resulting dip in oil production in the United States. But the effects of the oil price crash are now being felt. New data from the EIA says that U.S. oil production is declining. Having already predicted a 57,000 barrel-per-day decline for May, the agency now says that another 86,000 barrels per day in output will vanish in June.

In other words, as Saudi Arabia ramps up, U.S. shale is being forced to cut back. This story has been told many times over the past few months, but the data is finally confirming the success of Saudi Arabia's strategy, albeit a minor one thus far.

But at the same time, Saudi Arabia's (and OPEC's) influence is much more limited than it was in the past. Despite Saudi Arabia producing at its highest level in more than 30 years, oil prices have climbed back from their lows. WTI has jumped more than 36 percent since March, now trading above $60 per barrel. Brent has surpassed $66 per barrel, up more than 26 percent in two months. That is obviously good for Saudi Arabia, but oil prices may not have stayed low enough to do real lasting damage on U.S. shale.

The rise in oil prices came despite Saudi Arabia's best efforts at flooding the market. There are several reasons for this. First, demand is starting to kick back in, which is soaking up some of that extra crude flowing around. Refinery throughputs are at three-month high, with 92 percent of refining capacity in use.

A few other contributors to higher oil prices came in the form of a stronger-than-expected economic performance in Europe, as well as monetary stimulus in China. Both of those developments indicate stronger demand for oil in the months ahead. OPEC forecasts demand for 2015 to rise by 1.18 million barrels per day, an upward revision from previous estimates, and a higher rate of growth from last year's 0.96 million-barrel-per-day increase.

Another reason for higher prices is that the U.S. dollar has weakened a bit, and since oil is priced in dollars, a weaker dollar translates into higher prices.

Also, on the supply side, until May U.S. producers managed to steadily increase output, achieving gains in efficiency that kept production flowing even though rigs fell out of service.

Nevertheless, Saudi Arabia may still have the upper hand. Oil inventories in the U.S. are still at 80-year highs, which should keep a lid on prices. That will continue to inflict damage on U.S. drillers. Several companies have declared bankruptcy, the latest being American Eagle Energy Corp., a Colorado driller. More could soon be coming. Some companies have hedged their production in order to protect themselves from the downside of oil prices. But as those positions expire, more will become exposed to low oil prices.

OPEC and the International Energy Agency project that global oil production is still 1.5 million barrels per day higher than consumption. The glut isn't over yet.

Moreover, hedge funds have piled into long positions on crude oil. The record level of bullish bets on oil prices suggests that oil has been pushed higher by speculation. That means that a correction could push prices back down, as has happened in the past.

In summary, while foregoing price targets, Saudi Arabia has managed to maintain its market share throughout the oil bust, with adjustment coming from higher cost producers. That's exactly what it set out to do.

Source: http://oilprice.com/Energy/Crude-Oil/Saudi-Arabia-Continues-to-Turn-Screws-On-U.S.-Shale.html

By James Stafford of Oilprice.com

© 2015 Copyright OilPrice.com - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

OilPrice.com Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules