Opec pumps about a third of the world’s oil supply but has allowed prices to fall in a move thought to be aimed at higher-cost producers such as U.S. shale and the North Sea. Much of the blame for lower oil prices has been levied at Saudi Arabia, the largest oil exporter with the lowest cost of production. Calendar No. 217. Shortly thereafter, on September 17, the U.S. House Energy & Commerce Committee passed its own bi-partisan Act to authorize the unrestricted export of crude oil, H.R. 702, which provides that “no official of the Federal Government shall impose or enforce any restriction on the export of crude oil“. The failure of producers to cut output fast enough may require prices to fall near a barrel to clear the surplus, Goldman Sachs Group Inc. estimates. The price drop cut deeply into oil cash flows forcing the entire industry to pull back the reins on spending, leading to a screeching halt to US oil production growth this year. That places further strain on the 12 members of OPEC forward of the cartel’s subsequent assembly. He justified it by saying that, if Saudi Arabia did reduce its production by one or two million barrels, other producers would secure them, which could lead to less production as well as lower prices. The Company formerly declared revisions to its agreements with its gas processing providers in the Rocky Mountain region allowing it to report operated sales volumes in three streams (oil, NGLs and natural gas) effective January 1, 2015.
Since June, oil prices fell 60 percent owing to the oversupply and slowdown in China’s economy. It was, instead, the result of the global financial crisis that was started by the U.S. because of the real estate market. The EIA notes that there’s an unusual amount of uncertainty in the forecast for world oil, and if your main reason for buying energy stocks is a feeling that oil is cheap, you should be aware that predicting commodity prices isn’t easy. However, their decline was offset by a 6% increase in the price of oil, the dominant element within the index. The EIA report followed recent steps taken by the Senate Energy and Natural Resources Committee to pass legislation to lift the restrictions, and was praised by Senator Murkowski as support for moving forward to broaden the scope of permissible US crude oil exports. As such, we go short WTI time spread with a suggested target of -$2/bbl and a recommended stop at -$0.65/bbl.
Developing countries have abundantly spent on crude oil and petroleum product imports, which revived their economies. The unexpected decline in demand is a totally different story. Strap on your seatbelts for what could be a wild ride. I wrote this article myself, and it expresses my own opinions.