OPEC are continuing to play a very dangerous game. For the past 2 years, with the emergence of US shale oil and Canadian tar sand oil, OPEC – which accounts for about a third of world – have been reluctant to reduce oil production in fear that would lose some of the market share. In turn prices fell, as supply continued to grow against demand. This, on the back of Iran’s oil minister stating that OPEC members supply too much crude oil to the market and are responsible for low prices. However, there are signs of this tactic working, and the recent OPEC meeting suggests that the war on attrition is set to continue for oil rich nations.
Oil prices have more than halved over the past 18 months to a fraction of what most OPEC members need to balance their budgets. Benchmark Brent and U.S. crude futures fell nearly 2% after the meeting. This has had a dramatic effect on US fracking companies, where they need $40 a barrel to remain profitable. The drilling rig count in the second-largest U.S, oil producing state has dropped in the past year to 64 from 191, due to falling oil prices and but also to oil rigs having to adapt and become more efficient.
OPEC are continuing to play a very dangerous game. For the past 2 years, with the emergence of US shale oil and Canadian tar sand oil, OPEC – which accounts for about a third of world – have been reluctant to reduce oil production in fear that would lose some of the market share. In turn prices fell, as supply continued to grow against demand. This, on the back of Iran’s oil minister stating that OPEC members supply too much crude oil to the market and are responsible for low prices. However, there are signs of this tactic working, and the recent OPEC meeting suggests that the war on attrition is set to continue for oil rich nations.Oil prices have more than halved over the past 18 months to a fraction of what most OPEC members need to balance their budgets. Benchmark Brent and U.S. crude futures fell nearly 2% after the meeting. This has had a dramatic effect on US fracking companies, where they need $40 a barrel to remain profitable. The drilling rig count in the second-largest U.S, oil producing state has dropped in the past year to 64 from 191, due to falling oil prices and but also to oil rigs having to adapt and become more efficient.
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