• 4 minutes Why Trump Is Right to Re-Open the Economy
  • 7 minutes Did Trump start the oil price war?
  • 11 minutes Covid-19 logarithmic growth
  • 15 minutes Charts of COVID-19 Fatality Rate by Age and Sex
  • 18 minutes China Takes Axe To Alternative Energy Funding, Slashing Subsidies For Solar And Wind
  • 6 hours Russia's Rosneft Oil Company announces termination of its activity in Venezuela
  • 2 hours Trump eyes massive expulsion of suspected Chinese spies
  • 1 hour >>The falling of the Persian Gulf oil empires is near <<
  • 8 mins KSA taking Missiles from ?
  • 1 hour A New Solar-Panel Plant Could Have Capacity to Meet Half of Global Demand
  • 3 hours Saudi Arabia Can't Endure $30 Oil For Long
  • 8 hours America’s Corona Tsar, Andrew Fauci, Concedes Covid-19 May Be Just a Bad Flu With a Fatality Rate of 0.1%
  • 12 hours Where's the storage?
  • 58 mins TRUMP pushing Hydroxychloroquine + Zpak therapy forward despite FDA conservative approach. As he reasons, "What have we got to lose ?"
  • 12 hours Western Canadian Select selling for $6.48 bbl. Enbridge charges between $7 to $9 bbl to ship to the GOM refineries.
  • 14 hours China extracts record amount of natural gas from Gas Hydrates in South China Sea
  • 24 mins There are 4 major mfg of hydroxychloroquine in the world. China, Germany, India and Israel. Germany and India are hoarding production and blocked exports to the United States. China not shipping any , don't know their policy.
  • 12 hours Hillary Clinton tweeted a sick Covid joke just to attack Trump

Balance Of Oil Power Shifts Away From OPEC

Permian

The balance of powers in the world of oil has shifted away from OPEC and towards the Americas, particularly the United States. This is what Roubini Global Economics analyst Rachel Ziemba told Bloomberg, confirming what has been becoming increasingly obvious since November.

Falling costs in the shale patch, Ziemba said, have increased the international oil pricing power of U.S. producers, at the same time taking away much of OPEC’s leverage, as evidenced by Saudi Arabia—the cartel’s leader—which seemed to have been prepared to live with lower prices for a while, but only a short while. Once it started becoming clear that the market rebalancing would take longer than expected, the Kingdom found it was ready to continue cutting production instead of focusing on keeping its market share.

Ziemba also notes how OPEC underestimated the resilience of U.S. shale drillers, at least initially. It seems that when OPEC realized exactly how resilient these producers can be, it was too late to do anything constructive against them. What’s more, OPEC’s failure to rein in the U.S. producers and prop up prices has made privatization plans like Aramco’s much-hyped IPO much riskier than a few months ago.

This power shift in oil has also affected the traditional correlation between geopolitical tensions and oil prices. The latest events in the Gulf, the Qatar embargo, and the stalemate that the opposing parties are facing now due to Qatar’s unwillingness to accede to the demands of its neighbors and their inability to do anything about it, have not helped to lift oil prices much. If anything, Ziemba says, they’ve had a pressuring effect because the embargo has likely motivated higher production.

Geopolitical events have less of an effect on oil prices than they traditionally have had because of the glut. There is still so much oil around that the market doesn’t worry much about geopolitical problems. In a couple of years, Ziemba conceded, geopolitical factors might come to play a bigger role in oil prices again, but for now, their importance is on the wane.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage




Leave a comment

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News