The US shale boom is grinding to a halt.
In its latest monthly oil-market report, published Monday, the 12-member oil cartel OPEC said US oil producers were finally beginning to feel the squeeze of lower oil prices.
OPEC writes: "In North America, there are signs that US production has started to respond to reduced investment and activity. Indeed, all eyes are on how quickly US production falls."
OPEC slashed its forecast for US production in 2015 by 100,000 barrels a day to 13.75 million.
Before the oil crash that started mid-2014, OPEC essentially controlled oil prices through its output, increasing or decreasing supply as conditions warranted.
More global players have entered the scene in recent years, however, notably US shale producers, whose drilling methods allowed them to drill more cheaply and to ramp up production faster. This brought new supply to the market and is largely seen as the trigger for what sent oil prices tumbling about 60% from last year.
But through the collapse in prices, OPEC has continued to pump oil in a fight to maintain the market share it enjoyed for years. And with this new forecast, OPEC is more or less claiming victory over shale producers in this stage of the oil-price war.
OPEC's new forecast echoes a report Friday from the International Energy Agency that said low oil prices could bring US oil production to a grinding halt.Slashed? 100,000 / 13.75 million = 0.7% decrease.
The 13.75 million bopd is a record production of US crude oil production no one saw coming ten years ago.
Who Does The Math, Anyway?
Along that same line, BloombergBusiness had this IEA forecast:
Oil supplies outside OPEC will decline next year by the most in more than two decades as the price rout curbs U.S. shale output, according to the International Energy Agency.
Production outside the Organization of Petroleum Exporting Countries will fall by 500,000 barrels a day to 57.7 million in 2016, the Paris-based adviser said Friday in its monthly report. While fuel demand this year will be the strongest since 2010, record-high oil inventories in developed nations won’t start to diminish until the second half of next year, and the revival of Iranian exports with the removal of sanctions may swell supplies further.
Shrinking supplies outside OPEC show that Saudi Arabia’s strategy to defend the group’s market share by pressuring rivals with lower prices “appears to be having the intended effect,” the IEA said. Brent crude futures, a benchmark used around the world, slumped to a six-year low near $42 a barrel on Aug. 24. Production may not be falling fast enough to clear the global surplus and prices could drop as low as $20, according to Goldman Sachs Group Inc.This is a most interesting article. Look at what was said:
- a decrease of 500,000 bopd in 2016
- that decrease is ALL of non-OPEC
- even if the full 500,000 bopd had fallen on the US, it would have been inconsequential. But this is ALL of non-OPEC, which when I last looked, included Russia, Mexico, Canada, and Latvia
- Texas and North Dakota alone could handle a combined 500,000 bopd decrease, and this doesn't even begin to include the implosion that we are starting to see in Alberta (that would be western Canada) -- which can't even get a pipeline to the west coast and they don't even need President Obama's approval to do that
- this is what Saudi accomplished: got the Americans (and the rest of the world) hooked on oil AGAIN; and, pretty much destroyed any interest in intermittent energy (wind, solar) unless entirely financed by gullible taxpayers and/or mandated by the government
- 500,000 / 58.2 million bopd = 0.9%.
Saudi Arabia took a bath -- giving their oil away for $50/bbl and all they achieved was a measly 1% drop in non-OPEC oil production.
Note: I often make simple arithmetic errors, and there may be huge errors here. For all I know, my decimal point is off by a decimal or two and perhaps Saudi sees a 100% drop in non-OPEC oil production. I honestly don't know. But when I see headlines and stories like this and the math works out to less than 1% -- and that's a year from now -- I wonder about the news source.