As expected, the Organization of Petroleum Exporting Countries agreed Friday to maintain crude oil production at 30 million barrels a day. In effect, that means a license for both OPEC and non-OPEC producers to increase output as they see fit. Saudi Arabia intends to continue its price war on U.S. shale that was interrupted by the recent speculative upswing in crude prices, writes Bloomberg.
Oil prices plummeted last year after OPEC, led by the Saudis, refused to cut output in response to a global glut. That has already cost the oil industry about 100,000 jobs and as much as $1 trillion in scrapped investment projects. Yet the main players have only increased output. In April, according to the International Energy Agency, OPEC supply was at 31.2 million barrels a day, the highest since September 2012. That was the 12th consecutive month that OPEC production was above the official 30 million barrel limit, and Saudi Arabia was pumping as fast as it could, keeping its output above 10 million barrels a day.
Its enthusiasm was, however, surpassed by the biggest non-OPEC oil power, Russia. In May, it extracted 10.7 million barrels per day, compared with the Saudis’ 10.2 million. It was the first time Russia took the global lead since 2010.
The U.S. oil industry, too, did its best to show it was not intimidated. In May, it produced an average of 9.4 million barrels of crude per day, 2.7 percent more than in January and the most since 1972. That provided a nice backdrop to the gung-ho speech by ConocoPhillips Chief Executive Officer Ryan Lance at this week’s OPEC conference.
“This business will survive at $100 Brent oil pricing and it will survive at $60-70 Brent pricing”, he said, adding that a 15 percent to 30 percent drop in production costs in recent months allows the best U.S. frackers to stay profitable even with Brent crude at $40.
