Iran sees no OPEC shift toward a cut, says oil industry could withstand $25 crude

Reuters ^ | 01/19/2015 | Michelle Moghtader

[SleeperCatcher]

Iran sees no sign of a shift within OPEC toward action to support oil prices, its oil minister said, adding its oil industry could ride out a further price slump to $25 a barrel.

The comments are a further sign that despite lobbying by Iran and Venezuela, there is little chance of collective action by the 12-member OPEC to prop up prices - entrenching the reluctance of individual members to curb their own supplies.

[Cowboy Bob]

Prices are already dropping with the news...

[Pearls Before Swine]

This is just crap. The industry can withstand any low price... for a short time. But, oil demand being what it is, a continued low price that goes on for a year will cause a self-correcting decrease in supply which will raise the prices.

[cicero2k]

Weird. A collective 15% reduction in production could yield 100% increase in revenue, netting 85% gain.

But they don’t, because of self interest. Plus, eventually, alternate production will squeeze them further so they would need a 20% reduction in a few years, etc.; until they are irrelevant.

So now we have a $50 ceiling, forever.

Game theory, being played out.

[Awgie]

The Green Godess Mother Gaia will be on the phone with Algore and her other earthly minions, trying to thwart all attempts to make “OIL” a cheap affordable long term source of energy.

She has big investments in windmills and electric cars and rubber bands.

[Sam Gamgee]

I agree. A long term price this or that low would savage the oil sands and production in the Dakotas ect. The long term result would be leaving a larger percentage of production in Middle East hands.

[Sam Gamgee]

I was thinking of that too. Oil prices where they are basically are the final argument as far as I'm concerned. Who needs alternative energy. If the market is right, which is arguably never is these days in the SHORT term, but if the 40s is where oil is going to sit for a long time, then the message is that there is ample supply of cheap oil, and alternatives just are not required.

[Pearls Before Swine]

A long term price this or that low would savage the oil sands and production in the Dakotas ect. The long term result would be leaving a larger percentage of production in Middle East hands.

I'm not sure we do agree completely.

I don't think the MidEast can hold out all that long at $25 dollars. $50, sure. There are figures which say that Saudi and some of the wealthier emirates have break even budgets at closer to $100/barrel. I'm talking about their overall fiscal condition, not the marginal price of oil, which is much lower. THey have accumulated substantial foreign reserves over the years, but I think they'd be crazy to dissipate them all in a multi-year campaign to damage higher cost production. Then what? It would come back.

[Sam Gamgee]

I’ve seen those charts listed here before but I’m not sure I agree with them? How on earth can Saudi Oil break even at $100? They have traditionally been the cheapest place in the world to produce oil. I just question those numbers I wonder if there is somewhere that data can be confirmed.

[Pearls Before Swine]

There’s two types of charts.

One kind shows the cost of producing the oil... the one I saw from Morgan Stanley said Saudi was around an average of $27/barrel, onshore US and other ME oil around $40.

The second kind looks at the country’s budget, and how much of it is financed by oil sales. Saudi’s biggest revenue producer (suprise!) is oil. Then it calculates what price/volume they need to not run a budget deficit. That’s where the high fiscal breakeven numbers come from. Russia is another place with modest oil production costs, but high fiscal dependence on external oil and gas sales.

[Sam Gamgee]

Got it. That makes more sense.

[Don_Ret_USAF]

With the lower oil prices. It wouldn’t it be a good time to fill the emergency oil reserve.
Don