• 4 minutes China 2019 - Orwell was 35 years out
  • 7 minutes Wonders of US Shale: US Shale Benefits: The U.S. leads global petroleum and natural gas production with record growth in 2018
  • 11 minutes Trump will capitulate on the trade war
  • 14 minutes Glory to Hong Kong
  • 3 hours 5 Tweets That Change The World?
  • 13 hours The power of propaganda has no boundaries: Which country has larger territory US od China
  • 7 hours Freedom of Speech for Dummies
  • 2 hours Boring! See Ya Clowns, And Have Fun In Germany
  • 2 hours Bloomberg: shale slowing. Third wave of shale coming.
  • 6 hours The Mysterious Iranian Tanker
  • 16 hours South Korea Unveils Fighter Jet Mock-Up Amid Program Challenges
  • 19 hours Iranian Oil Tanker struck by missiles off Jeddah
  • 13 hours How The US Quietly Lost The 1st Amendment
  • 18 hours National Geographic Warns Billions Face Shortages Of Food And Clean Water Over Next 30 Years
  • 8 hours Climate Protesters Blocking Roads etc...
  • 14 hours Crazy Stories From Round The World
Solar Storms Can Devastate Entire Civilizations

Solar Storms Can Devastate Entire Civilizations

Climate change gets all the…

Iran's 3-Part Plan To Outsmart Sanctions

Iran's 3-Part Plan To Outsmart Sanctions

Iran’s priority in continuing to…

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
Download on the App Store Get it on Google Play