OPEC’s only way against the United States shale oil: re-start the oil war

OPEC and non-OPEC major oil-producing countries reached an agreement at the end of November last year to boost oil prices. At that time the market a good voice, but one analyst asserted that the cut agreement will not work. Because some oil-producing countries have resorted to cheating, and American shale oil production is more resilient than ever. To the current point in time, can prove that the analyst’s concerns are justified.

OPEC VS US shale oil

Although the shale oil company’s debt level is a big problem, but the United States shale oil is indeed more flexible than before. Although OPEC members did not completely cheat, but some countries in the slowdown in production. Russia in the negotiations in the end to get a favorable result, although Russia agreed to cut 30 million barrels / day, but the output from last year’s record highs in the level of gradually reduced, so Saudi Arabia had to bear about 50 million barrels / day The burden of the burden.

Oil prices rose to around $ 50 in a month’s time, and remained at more than $ 50 in January. And then after the oil prices began to fall, first shock down, gradually lower, after all the way quickly diving. Now oil prices have returned to the level before the cut agreement reached, pessimism enveloped the market.

Eugen Weinberg, head of commodities at the German commercial bank line, said the cut-off agreement would not work, but his voice was just a glimpse of the voices, Immediate increase in production agreement after the oil price is expected.

Weberger said in early December last year that the OPEC production agreement would only increase US oil production, so he maintained its oil price is expected to remain unchanged: oil prices are expected to decline below $ 50 this year, the current trend has confirmed his judgment The In addition, those who quickly raised oil prices are expected to quickly change the previous expectations, because the oil market is very pessimistic, the reality had to make them yield.

Weinberg suggested that OPEC change the strategy and return to the original plan: the maximum production of oil, stifling US shale oil to use oil prices to rebound to produce oil opportunities.

“OPEC should crash the oil price as soon as possible, stifle the US shale oil business, put it in trouble, and then strive to stabilize oil prices over the long term.” But the most important question is whether OPEC can withstand the huge reversal of the strategy. They had struggled for too long in low oil prices.

Although Weinberg’s proposal will make OPEC kill a thousand, since the loss of eight hundred, but they have not much way to choose. Now placed in front of OPEC have such a few options: 1, continue to cut oil production; 2, to expand the rate of reduction. 3, to give up production, re-start the oil war.

The first option will not make much change, and OPEC needs to make a variety of efforts. The second option may be worse than the other two. Qatar, the oil long Atiyah said that a more substantial reduction will only for the United States shale oil companies to create a new round of production to create an enabling environment, and will not allow OPEC to benefit. Shale oil hiding in the dark, waiting for OPEC to expand production cuts, when the price increases, they will increase production.

From the point of view of oil prices, to some extent, Weinberg’s proposal may be the most effective. If OPEC completely reversed the established strategy, oil prices may plummet. However, the rate of decline in oil prices will not be as serious as OPEC worried, after all, oil prices have fallen low. But this strategy may not be enough to stifle the US shale oil business.