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OPEC, oil price and unintended consequences November 28, 2014

Posted by hslu in Economics, Energy, Middle East, Oil.
Tags: , , ,

OPEC has decided to keep its production at 30 million barrels a day which was expected by the market. WTI is down to $70/bbl right after the news was announced. I guess that shale oil is selling below $60/bbl now which is below the costs of many shale oil projects.

Many articles talked about decline of US shale oil production which it will in time. But there is another angle to this headline: heavy oil and oil produced from oil sand projects face even higher pressure because prices for heavy oil are even lower but they cost more to produce.

Oil price will drift lower into the $60 range and more pain will be felt in the oil industry. Oil company stocks will face downward pressure until things stablize in the supply and demand picture in the world.

Wait to pick up some bargains when there is blood on the street.

There are fights breaking out on the main street but only some blood is spilled. More actions will come.

If I have to guess, just a guess, the bottom is closer to current level than the top is.

Well, your guess is just as good as mine.



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