Good day all. If you have followed the Fracking debate, you will know that the process is used to produce oil that normally wouldn’t be economically viable. As the technology has matured, the costs have plummeted.
Thanks to this, reserves of recoverable oil and natural gas in the United States have skyrocketed. This has caused the price of oil and gas to drop significantly. One group that is desperate to stop the price fall is OPEC. They’ve tried everything to kill off American/Canadian oil and gas production. Now, OPEC is running out of gas. Here are the details from Bloomberg:
OPEC’s plan to boost oil prices by cutting production has fizzled, yet it has little choice but to stick with it.
Crude has surrendered all of its gains since the Organization of Petroleum Exporting Countries first agreed production cuts in November. While the group has implemented the curbs, a rebound in U.S. shale output and stubbornly-high stockpiles show the world’s three-year crude glut isn’t shifting. Even signals from Saudi Arabia and Russia that they’ll prolong the supply reductions haven’t staunched the rout.
Yet OPEC has limited room for maneuver when it meets on May 25 in Vienna to discuss the deal, and is almost certain to persevere because the alternatives look even worse. If it were to deepen the cutbacks, even more shale supplies might come along to fill the gap, according to UBS Group AG. Abandoning the policy and restoring output would inflict the economic pain of crude below $40, Citigroup Inc. predicts.
“The risk of a higher cut is that it could trigger too strong an increase in prices and support U.S. shale,” said Giovanni Staunovo, an analyst at UBS in Zurich. “If they change strategy, Saudi Arabia would lose face. You can’t say you want lower inventories, and after a few months give up.”
What we are seeing is the collapse of a monopoly. OPEC came along about 60 years ago, and has been run primarily by the Arab countries, led by Saudi Arabia. Thanks to blind stupidity from the United States, OPEC was able to put the screws to us. We were forced to defend them, and couldn’t give the full boat support to Israel that they should have, as the only democracy in the region. Now, with shale oil and fracking, along with OPEC’s utter incompetence in upgrading their own oil infrastructure, they are beginning to understand that soon, the United States will ignore them.
The selloff came even after a statement from Russian Energy Minister Alexander Novak that his country was “inclined toward” an extension of production cuts into the second half. He was echoing his Saudi counterpart Khalid al-Falih, who said on April 26 that there’s a preliminary consensus to prolong the agreement with backing from other OPEC nations such as Kuwait and Iraq.
Now how could I have forgotten about the Russians? Russia is sitting on oceans of oil. The problem is where it’s located. The Siberian oil fields are not all that easy to support, thanks to the cold, and a complete lack of roads and rail lines. There is also the problem of Russia, just like the Arabs, using oil as their primary means of supporting their economy. Putin has been spending the money on tanks and planes, not on expanding the Soviet Russian economic base.
With OPEC already showing near-perfect compliance in delivering its pledged 1.2 million barrel-a-day production cut and an extension looking likely, the group has little ammunition left in its battle to raise prices.
“The OPEC deal was doomed to failure from the very beginning,” said Eugen Weinberg, head of commodities research at Commerzbank AG. “If they deepen the cut, the effect will be short-lived. OPEC will find itself in the same position again in six months time, but non-OPEC would get more market share by then.”
[youtuber youtube=’http://www.youtube.com/watch?v=vsa1ZvzFgvU’]
While the International Energy Agency still predicts a rapid reduction in the supply glut in the second half of this year if OPEC maintains its cuts, data available right now show few signs of success.
I looked up the IEA. As I thought, it’s based in Paris and is populated by over-educated, privileged elitists. In other words, Clueless Eurotrash.
Global fuel stockpiles may have actually increased during the first quarter, the IEA estimates. In the U.S. — the world’s biggest consumer — crude inventories are dropping, but remain near record levels.
The levels are dropping for a simple reason. President Trump is working to Make America Great Again. People are finding jobs and they need to get to them. Take myself. Last year I was burning through about a tank of gas every 6 weeks. Now, since I have to drive to work, I’m burning through about a tank every week to ten days. However, that doesn’t mean that OPEC is going to profit from this.
Meanwhile, American production has roared back, growing by 523,000 barrels a day this year to the highest level in almost two years as investment returns, according to the Energy Information Administration.
When OPEC started playing their games to wreck the oil production system in the United States, the oil companies started making preparations. They began by capping oil wells that weren’t profitable and storing or selling the equipment. Once the situation changed, they uncapped the wells, bought new, more efficient equipment and started pumping and fracking again. What’s worse for OPEC? Those wells are now cheaper to pump then they were a couple of years ago.
There’s a sense of “dejection” in the market that the cuts aren’t working, but OPEC can still succeed if it stays the course, according to Energy Aspects Ltd.
“We still think the market does rebalance by the end of this year as long as OPEC continues its production cuts,” Amrita Sen, chief oil analyst at the London-based consultant, said in a Bloomberg television interview. “I don’t think they have many options.”
Oh I do hope that OPEC “Stays the course.” It will mean even more energy production jobs in the United States along with new customers. This is something the idiots in Europe and the Middle East don’t understand. The Free Market works. If potential customers can’t get what they need from OPEC at a decent price, they will look elsewhere. Guess who’s going to win that game?
Thatisall
~The Angry Webmaster~
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