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OPEC Pumps at Three-Year High Despite Oil Glut http://www.wsj.com/articles/opec-pumps-at-three-year-high-despite-oversupply-1439290204 http://www.wsj.com/artic

by xux 11y ago

OPEC Pumps at Three-Year High Despite Oil Glut http://www.wsj.com/articles/opec-pumps-at-three-year-high-despite-oversupply-1439290204 http://www.wsj.com/articles/opec-pumps-at-three-year-high-de... Relevant paragraph: "But in the current downward price spiral, the group has kept pumping, a move aimed at protecting market share, instead of prices. The strategy comes as a flood of new oil—including U.S. shale output and new OPEC production—hits at a time when demand forecasts remain cloudy. The result has been market oversupply, and sharply falling prices."

zubiaur 11y ago
Why should the OPEC stop pumping? Why is it expected that the OPEC has to regulate prices? Lifting prices, the cost of bringing oil to the surface, are much higher in the US than in the most important OPEC producers. Regulating the price by limiting supply would benefit non OPEC, high lifting cost producers the most. This are different times, now OPEC is letting the market, governed by supply and demand set the prices. The expectation before was that non OPEC countries would produce as much as they could and OPEC would supply the leftover demand. It was called "The Call on OPEC" that was back when the US was a net importer. Now the US producers more oil than what it imports. Heck, is producing more oil than Saudi Arabia! This article explain quite well how the call on OPEC used to work and why it is crazy in today's environment: http://blogs.platts.com/2015/01/02/opec-call-price-collapse/ http://blogs.platts.com/2015/01/02/opec-call-price-collapse/ Edit: excuse my English, is not m my native language and this was written on a phone.
- CapitalistCartr 11y ago
  The USA are still a net importer of oil, and OPEC are called upon to manage the price of oil because they put themselves in that position by doing so repeatedly since 1973.
  - zubiaur 11y ago
    Is it? http://www.energy.gov/maps/us-crude-oil-production-surpasses-net-imports http://www.energy.gov/maps/us-crude-oil-production-surpasses... The OPEC was able to put itself in that position due to limited worldwide supply. That has changed. Its no longer rational nor convenient for them be a supplier of the spare demand in an environment where doing so would keep prices high and encourage investment in oil production capacity outside OPEC, thus further eroding spare demand and market share.
    - PhantomGremlin 11y ago
      The grandparent post said: The USA are still a net importer of oil that is still true. What the graph you linked to tells you is that the USA is now producing more than 50% of its total consumption. It still imports the rest. You need to sum both entries on your graph to get the total. E.g. here's a quote from another govt agency: In 2014, the United States consumed a total of 6.97 billion barrels of petroleum products, an average of about 19.11 million barrels per day. http://www.eia.gov/tools/faqs/faq.cfm?id=33&t=6 http://www.eia.gov/tools/faqs/faq.cfm?id=33&t=6
      - zubiaur 11y ago
        True, and under current regulations the US will always be a net importer, since oil exports are forbidden.
- revelation 11y ago
  For the US government, it doesn't matter particularly if OPEC keeps the level of supply up or not; low oil prices may cause the local oil production to stall but they also dramatically help all other branches of the US economy. If supply goes down and prices up, the exports will just resume again. Saudi Arabia and other OPEC members however need high prices, they are not just a mere luxury to them. They may have $10 lifting costs but they have overextended their state budget by relying on oil profits to the point where they need a $80+ price to just maintain the status quo. They have no meaningful other economy.
  - zubiaur 11y ago
    Absolutely. What are their alternatives though? If they limit supply to keep artificially high prices they will still get a diminished accumulated income due to market share erosion. They will also encourage investment in oil producing capacity outside OPEC, risking further market share erosion. If they let supply and demand set the price it will eventually drive high OPEX producers out of business, somewhat mitigating their losses in market share and with the possibility for them to recover some of their lost income. It's a matter of high OPEX products going out of business before they run out of cash reserves

by xux 11y ago

zubiaur 11y ago

Why should the OPEC stop pumping? Why is it expected that the OPEC has to regulate prices? Lifting prices, the cost of bringing oil to the surface, are much higher in the US than in the most important OPEC producers. Regulating the price by limiting supply would benefit non OPEC, high lifting cost producers the most. This are different times, now OPEC is letting the market, governed by supply and demand set the prices. The expectation before was that non OPEC countries would produce as much as they could and OPEC would supply the leftover demand. It was called "The Call on OPEC" that was back when the US was a net importer. Now the US producers more oil than what it imports. Heck, is producing more oil than Saudi Arabia! This article explain quite well how the call on OPEC used to work and why it is crazy in today's environment: http://blogs.platts.com/2015/01/02/opec-call-price-collapse/ http://blogs.platts.com/2015/01/02/opec-call-price-collapse/ Edit: excuse my English, is not m my native language and this was written on a phone.

CapitalistCartr 11y ago
The USA are still a net importer of oil, and OPEC are called upon to manage the price of oil because they put themselves in that position by doing so repeatedly since 1973.
- zubiaur 11y ago
  Is it? http://www.energy.gov/maps/us-crude-oil-production-surpasses-net-imports http://www.energy.gov/maps/us-crude-oil-production-surpasses... The OPEC was able to put itself in that position due to limited worldwide supply. That has changed. Its no longer rational nor convenient for them be a supplier of the spare demand in an environment where doing so would keep prices high and encourage investment in oil production capacity outside OPEC, thus further eroding spare demand and market share.
  - PhantomGremlin 11y ago
    The grandparent post said: The USA are still a net importer of oil that is still true. What the graph you linked to tells you is that the USA is now producing more than 50% of its total consumption. It still imports the rest. You need to sum both entries on your graph to get the total. E.g. here's a quote from another govt agency: In 2014, the United States consumed a total of 6.97 billion barrels of petroleum products, an average of about 19.11 million barrels per day. http://www.eia.gov/tools/faqs/faq.cfm?id=33&t=6 http://www.eia.gov/tools/faqs/faq.cfm?id=33&t=6
    - zubiaur 11y ago
      True, and under current regulations the US will always be a net importer, since oil exports are forbidden.
revelation 11y ago
For the US government, it doesn't matter particularly if OPEC keeps the level of supply up or not; low oil prices may cause the local oil production to stall but they also dramatically help all other branches of the US economy. If supply goes down and prices up, the exports will just resume again. Saudi Arabia and other OPEC members however need high prices, they are not just a mere luxury to them. They may have $10 lifting costs but they have overextended their state budget by relying on oil profits to the point where they need a $80+ price to just maintain the status quo. They have no meaningful other economy.
- zubiaur 11y ago
  Absolutely. What are their alternatives though? If they limit supply to keep artificially high prices they will still get a diminished accumulated income due to market share erosion. They will also encourage investment in oil producing capacity outside OPEC, risking further market share erosion. If they let supply and demand set the price it will eventually drive high OPEX producers out of business, somewhat mitigating their losses in market share and with the possibility for them to recover some of their lost income. It's a matter of high OPEX products going out of business before they run out of cash reserves