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Stop blaming OPEC for low prices

By Nicholas Cunningham - posted Tuesday, 3 November 2015

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In this light, why is it that OPEC's decision to leave its quota unchanged in November 2014 elicited calls that the cartel was waging war? Why is the world not calling on U.S. shale producers – which have a much higher breakeven price – to get out of the business so that other oil producers around the world can survive? In any other sector, high-cost producers are forced out of the market. Nobody expects the stronger producers to cede ground to weaker ones.

U.S. production is now down by about 500,000 barrels per day since April. Oil prices will rise over the next year or so as U.S. shale is forced to cut back. That adjustment – high-cost suppliers forced out – is how markets are supposed to work.

Nevertheless, as OPEC heads to Vienna in six weeks' time, there will undoubtedly be more headlines about OPEC continuing its war on shale.

Article Source:

By Nick Cunningham of Oilprice.com