Connect with us

Is Saudi Production Enough to Shut out Shale Oil?

Markets

Is Saudi Production Enough to Shut out Shale Oil?

Fracking Graphic Illustration

Fracking Graphic Illustration

Advisers to the OPEC ministers behind OPEC’s decision to leave the cartel’s oil production at current levels should be happy with the news that US oil rig numbers are crashing. There’s no other word available to accurately describe the drop in the number of oil rigs in operation in the US. In the six weeks since December 5, the total number of oil rigs operating in the US has fallen by 209. This is the steepest drop in oil operations since 1987. There are no signs to indicate that the decline will stop any time soon. This should be music to the ears of the Saudi and the UAE oil ministers who were the main forces behind OPEC’s decision to keep its oil wells pumping at current rates despite declining global oil prices. Paired with a steep drop in new drilling permits, it appears the Saudi’s efforts at protecting its market share against shale oil is paying off.



Is it enough?

While the Saudi gambit has clipped the wings of shale oil drilling expansion in the US, it remains an open question whether the strategy to keep OPEC oil flowing at current levels is enough. Even though total US oil rig numbers are down, the US’ total daily oil production actually went up in January to 9.19  million barrels daily. This should trouble the Saudis. If this increased production stays constant or even goes up, this means that US producers are focusing on better extraction efficiency. If that’s the case, expect the price of oil to drop even further as the market share war drags on. The increased production also hints at the fact that US extraction costs might be offset by higher productivity which can drag the price of each unit of oil produced even further. At this point in time, it looks increasingly foolish to count US shale oil out.

Continue Reading
You may also like...
Comments

More in Markets

Newsletter


Refinance at
Loan Type

Please enable JavaScript for the best experience.


Mortgage Rate Averages
Free mortgage rate averages by Bankrate.com

Trending

Technology

To Top