This May Just Be The Start Of The Oil Price War Says IEA
Saudi Oil Minister Ali al-Naimi may be one of the most powerful individuals in the global oil industry. After all, as the top oil official in arguably the world’s most influential oil-producing country, he has enormous influence.
But for all his power, is he the most ingenious? That question arises from the release of two reports on the current state of the oil industry that look at whether or not OPEC’s strategy of forcing US shale to cut back is succeeding.
The first, issued on May 12 by OPEC, says, in essence, that Saudi Arabia’s effort to keep its own oil production at near-record highs is succeeding in wresting market share back from US producers of shale oil, also called “light, tight oil” (LTO). The second, issued a day later by the International Energy Agency (IEA), agrees, but only up to a point.
Related: How Much Longer Can The Oil Age Last?
“In the supposed standoff between OPEC and U.S. light tight oil (LTO), LTO appears to have blinked,” the IEA reported. “Following months of cost cutting and a 60 percent plunge in the U.S. rig count, the relentless rise in U.S. supply seems to be finally abating.”
But the report from the Paris-based IEA, which advises 29 industrialized countries on energy policy, also pointed to a rebound in oil prices that could benefit US shale producers.
As both the OPEC and IEA reports point out, the decline in US shale oil output has somewhat reduced the oil glut and led oil prices to rally up to about $65 per barrel. And the IEA adds that this brings LTO back above the threshold where its production becomes profitable again.
…click on the above link to read the rest of the article…
