Shale vs OPEC: What’s Going on with Oil Prices? Will the Bleeding Stop, and When?
by Jim Lane (Biofuels Digest) … Here’s what’s going on, as illustrated in this EIA chart, which shows the imbalance between increases in demand and the increases in non-OPEC production. In short, non-OPEC oil is being dumped on the market faster than rising demand can catch up with it:
And we also see in this EIA chart that the US and Canada are the culprits in significantly increasing supply to the market, and mostly US.
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One of the dynamic stories of the year is competition between the US and Saudi Arabia for market share in global oil production. First, there’s the narrowing gap in terms of crude oil production, …
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But, let’s consider also the “total oil” picture, in which we also consider the impact of natural gas as an oil substitute, and biofuels. Taking thos into account, the US has already passed Saudi Arabia, …
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If supply stays where it is, and demand remains weak, you better believe it is gonna go down more. But if some supply is taken off the market, and there’s some growth in demand, prices may go up. But I’m sure we’re never going to see $100 anymore.
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Given that US investments have much higher break-even points, it is a question of whether OPEC’s tolerance of the loss of oil income (the social factor) is greater than investor tolerance of losses, as shale oil ventures fall into negative margin territory. READ MORE and MORE (MainStreet) and MORE (Bloomberg BusinessWeek) and MORE (Bloomberg)
