This is the first article in English and i chose this specific subject since it generated a lot of viewers in Arabic.
In the beginning of October the Saudi representative to OPEC said ' my country is ready for the drop in oil prices' with the audience amazement, it was a clear message to the shale oil producers that we will not cut production even if it means a glut in the market, and that because of the fear of loosing their market share to Russia and Mexico. Later that month the Saudi oil minister stated to the Saudi news agency ' at this time it is hard to control the prices and it will be impossible for OPEC to take any decision which will reduce our market share'. the prices started falling drastically which made Saudi business men like Waleed Bin Talal say in an open letter ' it is a catastrophe that cannot go unnoticed'
Although the Saudi minister said earlier that the policy of lowering the prices is not aimed at anybody,yet in 22nd of December 2014 in an interview with MEES also published by FT said' why everybody is asking Saudi Arabia to cut production to save a country like Russia?why should Saudi be punished for the Russian uselessness? they have not invested in the fields in western Siberia they are old and abused, we are the efficient producers, we deserve our market share yet we as OPEC produce only 40% of the world production.
The Americans on the other hand see OPEC approach as a war against shale oil,Ed Morse of Citi-group said' the shale production will continue and we estimate that the US production will grow between 800,000 bpd to 1 mbpd.'
It looks rather confusing listening to both sides of the argument,so before we put all the facts in one go let us concentrate on Mr. Robert Einhorn Obama's administration coordinator for Iran blockade whom said ' without the Saudis and the others increase in production the west could not have reduced the Iranians export by half, this coordination started on 2009. Wall street journal 21 dec.
so what are the facts
1 - what are the market shares?
Saudi Arabia 15.11% , Russia 13.99% , Nigeria 6.7% , U.A.E 5.65% , Iraq 4.32% and the rest.The Americans as we can see have no market share because of the Congress decision 40 years ago. so,what does the shale oil has to do with market share?
2 - oil production
OPEC produces 37 Mbps of crude,gas and other derivatives and the rest of the world 55 Mbps,The OPEC production increased 20% in 13 years yet the Americans from 2008 till 2013 increased production by 40% as shown in the figure below.
So why OPEC waited till the 4th quarter of 2014 to talk about production and market share?
3 - The beginning of American export
On December 30 the US commerce chamber announced that crude condensate can be exported, in a move most probably OPEC knew about earlier. This low viscosity ultra light sweet oil is available in the shale fields without processing, other higher viscosity oil can be processed then exported.
4 - why shale oil production did not crash as OPEC said?
Most of the American shale companies are selling using hedging contracts which protects the companies from market volatility, some companies have contracts till June the time when most experts say the oil market will go up( Reuters 5 Jan 2015), also these companies are more experienced now than 2008 when the well took 70 to 90 days to be competitive, now it takes them 14 days only and the technology might reduce the time and cost further.
putting all these facts together what do we find out?
It is naive to say the world slow economy and OPEC war with shale oil and the glut of oil in the market is the cause of the drop in prices, it has been planned 5 years earlier and the plan is working exactly as the thought it would especially we know that OPEC was watching the shale oil industry since 2008.
IT IS A NEW ERA OF OIL WORLD WERE OPEC IS NO LONGER IN CONTROL RATHER IT IS THE U.S.A
Although the Saudi minister said earlier that the policy of lowering the prices is not aimed at anybody,yet in 22nd of December 2014 in an interview with MEES also published by FT said' why everybody is asking Saudi Arabia to cut production to save a country like Russia?why should Saudi be punished for the Russian uselessness? they have not invested in the fields in western Siberia they are old and abused, we are the efficient producers, we deserve our market share yet we as OPEC produce only 40% of the world production.
The Americans on the other hand see OPEC approach as a war against shale oil,Ed Morse of Citi-group said' the shale production will continue and we estimate that the US production will grow between 800,000 bpd to 1 mbpd.'
It looks rather confusing listening to both sides of the argument,so before we put all the facts in one go let us concentrate on Mr. Robert Einhorn Obama's administration coordinator for Iran blockade whom said ' without the Saudis and the others increase in production the west could not have reduced the Iranians export by half, this coordination started on 2009. Wall street journal 21 dec.
so what are the facts
1 - what are the market shares?
Saudi Arabia 15.11% , Russia 13.99% , Nigeria 6.7% , U.A.E 5.65% , Iraq 4.32% and the rest.The Americans as we can see have no market share because of the Congress decision 40 years ago. so,what does the shale oil has to do with market share?
2 - oil production
OPEC produces 37 Mbps of crude,gas and other derivatives and the rest of the world 55 Mbps,The OPEC production increased 20% in 13 years yet the Americans from 2008 till 2013 increased production by 40% as shown in the figure below.
So why OPEC waited till the 4th quarter of 2014 to talk about production and market share?
3 - The beginning of American export
On December 30 the US commerce chamber announced that crude condensate can be exported, in a move most probably OPEC knew about earlier. This low viscosity ultra light sweet oil is available in the shale fields without processing, other higher viscosity oil can be processed then exported.
4 - why shale oil production did not crash as OPEC said?
Most of the American shale companies are selling using hedging contracts which protects the companies from market volatility, some companies have contracts till June the time when most experts say the oil market will go up( Reuters 5 Jan 2015), also these companies are more experienced now than 2008 when the well took 70 to 90 days to be competitive, now it takes them 14 days only and the technology might reduce the time and cost further.
putting all these facts together what do we find out?
- increase in U.S reserves and inventories which will effect future prices
- the reduction of OPEC production at the end of 2009 allowed high prices and huge profits to the starting shale oil production
- the regaining of world economy and the slow gradual OPEC production allowed very high oil prices 2011-2013 increasing the profits and investment in shale oil production and technology
- the Americans produced an astounding 8.8 Mb pd in December 2014 and adding natural gas and other products made the U.S. the largest oil producer in the world
It is naive to say the world slow economy and OPEC war with shale oil and the glut of oil in the market is the cause of the drop in prices, it has been planned 5 years earlier and the plan is working exactly as the thought it would especially we know that OPEC was watching the shale oil industry since 2008.
IT IS A NEW ERA OF OIL WORLD WERE OPEC IS NO LONGER IN CONTROL RATHER IT IS THE U.S.A
This is actually quite brilliant my friend. I think we look at it a little differently, but not much. I think the Saudi's are trying to cripple everyone and assert their authority, but something interesting you might have missed in this. The Obama administration is doing everything it can to make shale oil production more difficult. It places large quantities of shale rich land under "federal rule" so that people can't go get it. The are that is being fracked for oil is all private land, that he can't regulate.
ردحذفOn the off chance that the Saudis and the American government is in on this together, it is both of them trying to stop American oil production being cost effective.
Your theory on Saudi Arabia trying to crush Russia I think is spot on, and I have no doubt they want to back Iran into a corner too, but not just for the economic reasons. I don't think they like the Iranians helping the Iraqi with their ISIS problems either. Saudi Arabia can pretend to be anti ISIS but it is a Sunni Militia just like them, and as I have heard before. Islam is tolerant, but Muslims are not.