Best of the Week
Most Popular
1. Will Gold Price Breakout? 3 Things to Watch… - Jordan_Roy_Byrne
2.China Invades Saudi Oil Realm: PetroDollar Kill - Jim_Willie_CB
3.Bitcoin Price Trend Forecast, Paypal FUD Fake Cryptocurrency Warning - Nadeem_Walayat
4.The Stock Market Trend is Your Friend ’til the Very End - Rambus_Chartology
5.This Isn’t Your Grandfather’s (1960s) Inflation Scare - F_F_Wiley
6.GDX Gold Mining Stocks Fundamentals - Zeal_LLC
7.US Housing Real Estate Market and Banking Pressures Are Building - Chris_Vermeulen
8.Return of Stock Market Volatility Amidst Political Chaos and Uncertain Economy - Buildadv
9.Can Bitcoin Price Rally Continue After Paypal Fake FUD Attack? - Nadeem_Walayat
10.Warning Economic Implosion on the Horizon - Chris_Vermeulen
Last 7 days
Stock Market Predictive Modeling Is Calling For A Continued Rally - 22nd Apr 18
SWEATCOIN - Get PAID to WALK! Incentive to Burn Fat and Lose Weight - Review - 22nd Apr 18
Sheffield Local Elections 2018 Forecast Results - 22nd Apr 18
How Long Does it take for a 10%+ Stock Market Correction to Make New Highs - 21st Apr 18
Sheffield Ruling Labour Party Could Lose 10 Council Seats at May Local Elections - 21st Apr 18
Crude Oil Price Trend Forecast - Saudi Arabia $80 ARAMCO Stock IPO Target - 21st Apr 18
Gold Price Nearing Bull Market Breakout, Stocks to Follow - 20th Apr 18
What’s Bitcoin Really Worth? - 20th Apr 18
Stock Market May "Let Go" - 20th Apr 18
Overwhelming Evidence Against Near Stock Market Grand Supercycle Top - 20th Apr 18
Crude Oil Price Trend Forecast - Saudi's Want $100 for ARAMCO Stock IPO - 20th Apr 18
The Incredible Silver Trade – What You Need to Know - 20th Apr 18
Is War "Hell" for the Stock Market? - 19th Apr 18
Palladium Bullion Surges 17% In 9 Days On Russian Supply Concerns - 19th Apr 18
Breadth Study Suggests that Stock Market Bottom is Already In - 19th Apr 18
Allegory Regarding Investment Decisions Made On Basis Of Government’s Income Statement, Balance Sheet - 19th Apr 18
Gold – A Unique Repeat of the 2007 and How to Profit - 19th Apr 18
Abbeydale Park Rise Cherry Tree's in Blossom - Sheffield Street Tree Protests - 19th Apr 18
The Stock Market “Turn of the Month Effect” Exists in 11 of 11 Countries - 18th Apr 18
Winter is Coming - Coming Storms Will Bring Out the Best and Worst in Humanity - 18th Apr 18
What Does it Take to Create Living Wage Jobs? - 18th Apr 18
Gold and Silver Buy Signals - 18th Apr 18
WINTER IS COMING - The Ongoing Fourth Turning Crisis Part2 - 18th Apr 18
A Stock Market Rally on Low Volume is NOT Bearish - 17th Apr 18
Three Gold Charts, One Big Gold Stocks Opportunity - 17th Apr 18
Crude Oil Price As Bullish as it Seems? - 17th Apr 18
A Good Time to Buy Facebook? - 17th Apr 18
THE Financial Crisis Acronym of 2008 is Sounding Another Alarm - 16th Apr 18
Bombs, Missiles and War – What to Expect Next from the Stock Market - 16th Apr 18
Global Debt Bubble Hits New All Time High – One Quadrillion Reasons To Buy Gold - 16th Apr 18
Will Bitcoin Ever Recover? - 16th Apr 18
Stock Market Futures Bounce, But Stopped at Trendline - 16th Apr 18
How To Profit As Oil Prices Explode - 16th Apr 18
Junior Mining Stocks are Close to Breaking Downtrend - 16th Apr 18
Look Inside a Caravan at UK Holiday Park for Summer 2018 - Hoseasons Cayton Bay Sea Side - 16th Apr 18
Stock Market More Weakness? How Much? - 15th Apr 18
Time for the Gold Bulls to Show their Mettle - 15th Apr 18
Trading Markets Amid Sound of Wars - 15th Apr 18
Sugar Commodity Buying Levels Analysis - 14th Apr 18
The Oil Trade May Be Coming Alive - 14th Apr 18

Market Oracle FREE Newsletter

Trading Lessons

OPEC Just Confirmed It’s Losing the Oil War

Commodities / Crude Oil Apr 15, 2015 - 11:39 AM GMT

By: Money_Morning

Commodities

Dr. Kent Moors writes: The solid façade of OPEC is crumbling.

The latest indication that all is not well within the ranks of the oil cartel came yesterday, when the organization released its monthly Bulletin.

Inside the magazine, the commentary slammed non-member nations for failing to follow the organization’s lead in “stabilizing” oil prices and having “go it alone” attitudes.


But despite the essay’s reprimanding tone, I found two more hints that OPEC is losing its grip on world energy domination.

Today, the U.S.’s position as a rising energy superpower seems to have the cartel quaking in its boots.

Here’s why I think OPEC is losing the Oil War…

OPEC’s Grasp on Oil Control Loosens…

Although OPEC’s unusual report accused no country by name of blatantly snubbing its policies, it specifically noted that the U.S., along with Canada, (both shale oil sources) had increased production by 6.3 million barrels a day over the past nine years while OPEC had kept its aggregate volume at 30 million.

Traditionally, OPEC has served as the “global balancer” – increasing or cutting oil exports to maintain pricing ranges.

This time, however, it wants those cuts to come from elsewhere.

OPEC still controls 40% of the world’s production. Yet that does not have the impact it had previously.

And with some 86% of the world’s extractable unconventional crude located outside OPEC membership, the problem for the cartel will only become worse as more nations seek to satisfy more demand locally.

Led by Saudi Arabia, last November OPEC announced it had kept its production unchanged, precipitating the final major decline in crude prices. In one day, oil fell by 7% to $69.

True, the decision prompted some cuts from Russia in the face of a declining economy and a faltering currency (both direct results of low oil prices). And the ongoing civil war in Libya has effectively stopped all oil exports from that country.

… And the U.S.’s Energy Dominance Strengthens

But in Saudi Arabia’s eyes, the main culprit remains the U.S., whose expanding shale and tight oil production has shifted the “balancer” position in global oil from OPEC to the Americans.

My international contacts confirm that the U.S. production success has taken the main OPEC powerbrokers – the Saudis, Kuwait, and the United Arab Emirates – by surprise.

More oil is coming quicker than anticipated. Analysts are expecting American oil production to average 9.65 million barrels per day in 2015, beating the previous all-time record of 9.6 million in 1970.

This makes the initiative in yesterday’s Bulletin all the more interesting.

For decades, OPEC has regarded the crude market as essentially its own to control. But the cartel now writes, “There is a stubborn willingness of some non-OPEC producers to adopt a go-it-alone attitude, with scant regard for the consequences,” adding, “In the past, OPEC has often shouldered the burden of ensuring oil market stability alone. In the current situation, which should be of great concern to ALL, is it not time for this burden to be shared?”

It seems even in the oil market that karma can come back to bite you.

Private Enterprise Will Destroy OPEC

The truth is that, unless there is a worldwide agreement to stabilize production, the OPEC approach will fail. Of course, for the “stability” in pricing to take place an absolute decline in extractions must occur in the U.S.

Now, there are some tough choices on the horizon for some American oil companies. But these are resulting from domestic market pricing and high-risk debt concerns, not from what is happening elsewhere in the world.

That’s the most fascinating – and even vindicating – reason for the remarkable expansion of U.S. oil production.

These companies are all examples of private enterprise, a matter always difficult for national oil companies run by their respective states to understand.

And the problems that they face once again demonstrate the superiority of the U.S. economic system in which they conduct their businesses.

These are the problems whose solutions are going to cause certain energy investments to flourish as oil prices go higher – not any move from OPEC.

Open Dissention Within OPEC’s Ranks Weakens the Cartel

There is, however, another subtext in the OPEC commentary worth considering. It is an element I have commented on recently right here in OEI.

Disagreements are arising within OPEC itself over the move to keep production stable and prices low.

As I have mentioned before, OPEC members Venezuela, Iran, and Nigeria desperately need oil prices much higher (well over $100 a barrel) for any chance to save their teetering central budgets.

These cartel countries and others from within OPEC’s ranks have been exporting volumes higher than their monthly quotas from the cartel justify. These are the countries OPEC is condemning for having “go it alone” attitudes.

And some of these impoverished OPEC countries are starting to openly show their dissent.

Last Wednesday, Samir Kamal, Libya’s OPEC governor and director of the planning division at the country’s oil ministry, stated that members should change course and cut oil supply by 800,000 barrels per day or more to prevent an expected return of Iranian exports from weighing on prices.

There are two interesting aspects to this statement.

First, just about every expert inside and outside OPEC recognizes that it will take quite some time before Iranian increased exports hit the market, assuming a nuclear accord is even reached. Given the state of the Iranian oil sector, some estimates are now putting the time needed at several years, not months. 

Kemal might have been using Iran as an example. But his comments obviously address the economic pain felt by OPEC members due to the current policy of stabilizing prices.

Second, his comments were not submitted in a memo to OPEC or contributed to the Bulletin magazine. His opinions were contained in an unsolicited email to Reuters, an international news agency.

Saudi Arabia has some juggling to do. Not only is opposition to its OPEC policies becoming more pronounced within the cartel…

It is now going public.

Source :http://oilandenergyinvestor.com/2015/04/opec-just-confirmed-its-losing-the-oil-war/

Money Morning/The Money Map Report

©2015 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules