OPEC's Objective ???
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OPEC's Objective ???
by Admin Thu Oct 22, 2015 10:48 am
As far as I can see OPEC really have nothing to gain by over producing..
What was OPEC's original aim ?? Either to shaft the Russians (unlikely) or more likely US shale production.
Now I am certainly no expert but OPEC over producing and keeping the crude oil price purposely low does, as we can see, hurt the US shale oil producers.
US shale oil production has declined and is now on a par with pre- 2015 levels. But the low oil price isn’t just hurting the US oil producers it’s also hurting OPEC members, they are all losing profit too it’s just that the Saudi's (who call the shots) with the lowest production costs and a bigger bank balance than other OPEC members can hold out at the lower price for longer.
So all well and good but OPEC members obviously want to sell their oil for $70-$80/bbl rather than $45.61/bbl (10am 22/10/15).
Est. marginal cost of extraction per barrel July 2015
Saudi Arabia – $21/bbl
Middle East – $24/bbl
Russia – $26/bbl
Mexico – $42/bbl
S.America/Europe/Eurasia/Africa – $56/bbl
North America – $60/bbl
Gulf Deep Water – $70/bbl
Canada tar sands – $82/bbl
other unconventionals – $100/bbl
As you can see from the estimates above it’s not that the low crude price is bankrupting Middle East producers but they could be more than doubling their profit at $70/bbl no wonder they want a price of around &88/bbl.
So what happens when OPEC finally bring prices back to +$70/bbl, the productive capacity in the US still remains and is likely to restart as soon as the crude oil price rises again.
What really was the point that OPEC was making?
What was OPEC's original aim ?? Either to shaft the Russians (unlikely) or more likely US shale production.
Now I am certainly no expert but OPEC over producing and keeping the crude oil price purposely low does, as we can see, hurt the US shale oil producers.
US shale oil production has declined and is now on a par with pre- 2015 levels. But the low oil price isn’t just hurting the US oil producers it’s also hurting OPEC members, they are all losing profit too it’s just that the Saudi's (who call the shots) with the lowest production costs and a bigger bank balance than other OPEC members can hold out at the lower price for longer.
So all well and good but OPEC members obviously want to sell their oil for $70-$80/bbl rather than $45.61/bbl (10am 22/10/15).
Est. marginal cost of extraction per barrel July 2015
Saudi Arabia – $21/bbl
Middle East – $24/bbl
Russia – $26/bbl
Mexico – $42/bbl
S.America/Europe/Eurasia/Africa – $56/bbl
North America – $60/bbl
Gulf Deep Water – $70/bbl
Canada tar sands – $82/bbl
other unconventionals – $100/bbl
As you can see from the estimates above it’s not that the low crude price is bankrupting Middle East producers but they could be more than doubling their profit at $70/bbl no wonder they want a price of around &88/bbl.
So what happens when OPEC finally bring prices back to +$70/bbl, the productive capacity in the US still remains and is likely to restart as soon as the crude oil price rises again.
What really was the point that OPEC was making?
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