• 5 minutes 'No - Deal Brexit' vs 'Operation Fear' Globalist Pushback ... Impact to World Economies and Oil
  • 8 minutes China has *Already* Lost the Trade War. Meantime, the U.S. Might Sanction China’s Largest Oil Company
  • 12 minutes Will Uncle Sam Step Up and Cut Production
  • 3 hours China has invested btw $30 - $40 Billon in Canadian Oil Sands. Trump should put 10% tariffs on all Chinese oil exported into or thru U.S. in which Chinese companies have invested .
  • 43 mins Tit For Tat: China Strikes Back In Trade Dispute With U.S. With New Tariffs
  • 2 hours Trump vs. Xi Trade Battle, Running Commentary from Conservative Tree House
  • 14 hours Iran Is Winning Big In The Middle East
  • 3 mins It's Not the Job of the Government to Dictate Where Businesses Should Go
  • 11 hours Strong, the Strongest: Audi To Join Mercedes, BMW Development Alliance
  • 14 hours IS ANOTHER MIDDLE EAST WAR REQUIRED TO BOLSTER THE OIL PRICE
  • 1 day Trump cancels Denmark visit amid spat over sale of Greenland
  • 15 hours Not The Onion: Vivienne Westwood Says Greta Thunberg Should Run the World
  • 23 hours OPEC will consider all options. What options do they have ?
  • 12 hours Wonders of US Shale: US Shale Benefits: The U.S. leads global petroleum and natural gas production with record growth in 2018
  • 8 hours Recession Jitters Are Rising. Is There Reason To Worry?
  • 14 hours Philadelphia Energy Solutions seeks to permanently shut oil refinery - sources
Alt Text

Oil Craters On Fears of Currency War

Oil prices plunged on Wednesday…

Alt Text

The Threat That Will Send Oil Down To $10

French bank BNP Paribas published…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

Goldman Sachs: OPEC’s Influence On Oil Prices Is Dwindling

In a research note, Goldman Sachs has effectively demoted OPEC from a price setter to a mere inventory manager, with the cartel’s long-term control over international oil prices diminishing thanks to shale, which sports much faster returns: 6-9 months from final investment decision to peak production versus several years for conventional oil. The lengthy process of conventional oil is precisely what gave OPEC the ability to pull the strings of international prices.

Goldman commended OPEC on its decision to cut production, adding, however, that it had an opposite to the desired effect by “underwriting” shale oil production, and spurring the growth in it that we are now witnessing.

The investment bank also has some bad news for the oil industry, noting that the period between this year and 2019 will see a hefty increase in global oil production thanks to large-scale investments made in 2011-2013. In fact, Goldman expects the possible addition of 1 million barrels of crude to global daily output in the period.

There is some uncertainty as to whether all these mega projects will deliver in line with expectations, given the oil industry’s history of failing to do this, but delivery has improved in the last three years, so the 1 million barrels are a real possibility. Related: Trump’s Budget: Valuing Military Over Energy

In this context, Goldman says, OPEC has a dilemma: should it extend the production cuts to prevent prices from falling further—extending the invite for U.S. shale to come on in fuller force, or should it let them fall to avoid the risk of losing long-term market share, but crippling OPEC members’ bottom line.

Several OPEC members have already expressed their readiness to take part in an extension of the cut or have at least acknowledged the need for such an extension. Even Saudi Arabia, OPEC’s largest producer, has softened its stance from being previously unwilling to further strengthen U.S. shale by extending the deal, to saying it would back an extension if inventories remain high.

Meanwhile, benchmark prices were dealt another blow by the American Petroleum Institute, which yesterday reported a 4.5-million-barrel increase in U.S. crude oil inventories, exceeding analyst expectations of a build half that large.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play