Monday, November 17, 2014

Gary Shilling on Oil Prices and OPEC

We have a chart we use in our monthly newsletter Insight that shows OPEC and Non-OPEC production [of Oil]. In the last ten years OPEC production has been flat and all the growth has been Non-OPEC,.. a lot of it coming from North America with Fracking and Horizontal drilling, etc etc.

But this has left the Saudi's in a tough position because historically they have been the swing producers, they have been the country that's willing to cut back to avoid over-supply at given prices; in other words to keep prices from declining. 

They gotten to a point where they are saying "Hey we are not willing to put up with that. We are going for market share" 

Now at what price are they going to say enough is enough, its probably a lot lower price than other OPEC producers and a probably a lot lower price than the Oil Sands at Alberta would be profitable, its probably a price where there would be a lot of pain before the Saudi's throw in the towel. But you can never really tell, this is a Kingdom, this is not a democracy. But I think they are trying to run it rationally in their own long term sense.