Crude Oil: Consumption Vs Production -- EIA -- January 29, 2017

When Saudi Arabia dispensed with quotas and agreed to let OPEC members produce at whatever rate they wanted, there was a lot of speculation regarding their reasoning.

The two reasons most commonly cited:

• concern about US shale / tight oil revolution; and, 
• Saudi Arabia preserving market share within OPEC

I think there were at least two other reasons but I won't go into that now; it will distract from the bigger point.

(By the way, one wonders who their "western" advisor was back in 2014; or, if they made their decision without "western" advice).

Regardless of what Saudi Arabia was thinking back in late 2014 when OPEC abandoned the quotas, it is pretty clear that Saudi Arabia, in hindsight, clearly misread the situation.

In hindsight, it now appears that the US shale / tight oil revolution has upset the status quo, but the jury is still out whether US shale can truly make that big a difference in world oil supply. My hunch: at $50 oil, shale will not make a huge impact on global supply; at $150 oil, US shale will make a larger impact on global supply but to what extent, hard to say.

In hindsight, it almost seems that had Saudi Arabia and OPEC maintained orderly changes in quotas (up and down) the cartel could have:

• maintained better pricing control, and perhaps maintained oil at $100/bbl for quite some time; and, 
• adapted to US shale revolution; force Saudi Arabia to become "leaner and meaner"; or think beyond simply oil production

Regardless, here's the "past" and the "future" according to the EIA: