Posted on 01/22/2015 5:26:41 AM PST by thackney
OPEC defended on Wednesday its decision not to intervene to halt the oil price collapse, shrugging off warnings by top energy firms that the cartel's policy could lead to a huge supply shortage as investments dry up.
The strain the halving of oil prices since June is putting on producers was laid bare when non-member Oman voiced its first direct, public criticism of the Organization of the Petroleum Exporting Countries' November decision not to cut production but instead to focus on market share.
Oil prices have collapsed to below $50 a barrel as a result of a large supply glut, due mostly to a sharp rise in U.S. shale production as well as weaker global demand.
The rapid decline has left several smaller oil producing countries reeling and has forced oil companies to slash budgets.
Speaking at the World Economic Forum in Davos, Switzerland, the heads of two of the world's largest oil firms warned that the decline in investments in future production could lead to a supply shortage and a dramatic price increase.
Claudio Descalzi, the head of Italian energy company Eni Spa , said that unless OPEC acts to restore stability in oil prices, these could overshoot to $200 per barrel several years down the line.
"What we need is stability... OPEC is like the central bank for oil which must give stability to the oil prices to be able to invest in a regular way," Descalzi told Reuters Television.
He expected prices to stay low for 12-18 months but then start a gradual recovery as U.S. shale oil production began falling.
But both OPEC and Saudi Arabia, the group's largest producer, stuck to their guns.
(Excerpt) Read more at rigzone.com ...
US will obviously take advantage of lower pricing to rebuild reserves and shale industries will modify techniques to make processes more efficient. some will close down, others will prosper...
corrections in over inflated prices are cyclical and necessary to strengthen economies. fighting to preserve the status quo never ends well.
1. WAR IS PEACE
2. FREEDOM IS SLAVERY
3. IGNORANCE IS STRENGTH,
4. ABUNDANCE IS POVERTY
The strategic petroleum reserve is 95% full. How many days of OPEC imports do you think we need?
shale industries will modify techniques to make processes more efficient
Massive drops in cash flow with lots of layoffs tend not to be the time to spend a lot on R&D. That time already past. Many advances were made during the boom to reduce costs and gain efficiency, like the walking rig.
Now is the time to conserve spending and survive. Those still in strong financial position and without much debt get a better return on the dollar buying reserves and assets from those near bankruptcy. Many majors are more in a position to grow proved reserves at this time.
Pootie Poot is playing chess...
One step backward, two steps forward.
Wouldn’t the Arabs want a future shortage to sell later less oil for top dollar?
The problem is the production takes time to get going. Just like demand will grow and production falls at low points.
See 2008 price spike for an example.
I see Saudi believing that $100 creates too much growing competition from oil sands, shale oil, etc.
I think they will want to let supply drop and demand grow up to ~$75 and vary production rates to keep it near there. But I hate making predictions and anything really could happen.
On the oil prices, I don't see him part of it at all. They are producing all they can and have greatly reduced revenues on the price drop.
With all due respect, our President has potentially several mental disorders.
“See 2008 price spike for an example.”
And remember what caused them to drop like a rock.
I think the reserves are already full... and they are tiny to begin with. We lack additional capacity for storage, which is one reason prices can swing on a dime- we can’t really stockpile it if the EPA won’t allow anything new to be built to enlarge capacity.
That said, the Saudis are looking at an Iranian satellite the used to be Sunni-dominated Iraq on their northern border, and an Iranian satellite state on their southern border- Yemen. Now that Yemen is fallen and they are trying to hurt Iran in whatever way that they can.
Warnings by top energy firms: “The cartel’s policy could lead to a huge supply shortage as investments dry up”
OPEC: “So? Then we raise the price through the roof and screw you from the other side”
Really???
How many days of OPEC imports do you think we need?
The next financial collapse, already on our radar screen, will not come from hedge funds or home mortgages. It will come from junk bonds, especially energy-related and emerging-market corporate debt. The Financial Times recently estimated that the total amount of energy-related corporate debt issued from 2009-2014 for exploration and development is over $5 trillion. Meanwhile, the Bank for International Settlements recently estimated that the total amount of emerging-market dollar-denominated corporate debt is over $9 trillion.
http://www.freerepublic.com/focus/f-bloggers/3249214/posts
Pootie may not be a part of it now, but here’s a scenario for you to ponder. Iran has been deploying troops inside Iraq for about two months now under the guise of “fighting ISIS”. Two plane-loads a day from what I’ve read. The Yemeni government fell yesterday, apparently with the help of the Iranians. Iranians are also in Syria. Draw a line between Iran, Syria and Yemen. What is in the middle of the triangle? Everyone knows there’s no love lost between the Persians and the Arabs. What if the Iranians long play here is to make a move on the House of Saud, perhaps with tactical air support from, say Russia?
I agree that this is want the Saudis WANT to do... but, last time global demand ticked up? I think they couldn't produce enough to control the price.
Most likely, it'll even be worse this time around.
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