OPEC Finding U.S. Shale Harder to Crack as Rout Deepens
By Grant Smith and Dan Murtaugh Oct 15, 2014 12:38 PM ET
OPEC is resisting pressure to cut oil production while demand slumps as it tests how low prices must go to make U.S. shale oil unprofitable. As producers become more efficient, that floor is sinking.
The Organization of Petroleum Exporting Countries boosted output by the most in 13 months in September, even as crude plunged into a bear market and demand growth weakens to a five-year low, according to the International Energy Agency. Saudi Arabia and Kuwait, the largest and third-largest members of OPEC, indicated the price slump doesn’t warrant immediate production cuts, the IEA said.
While OPEC acted as a “swing producer” over the past decade, responding to surpluses by cutting output, it’s now letting oil slide to see if North American production can withstand lower prices, said Antoine Halff, head of the IEA’s oil industry and markets division. So far drillers are showing no signs of cracking, with the U.S. government forecasting record shale output in November, helping boost the nation’s crude supply to the highest level since 1986.
“This is a new situation and will likely elicit a new response from OPEC,” Halff said by phone from Paris yesterday. “We’re more likely to see OPEC let market forces play out and let the higher-cost production be the first one to cut.”
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http://www.bloomberg.com/news/2014-10-15/opec-finding-u-s-shale-harder-to-crack-as-rout-deepens.html
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