MOSCOW, Nov. 29 (PNA/Sputnik) — OPEC’s (Organization of Petroleum Exporting Countries) refusal to cut production amid collapsing oil prices heralds a new era of American dominance in the oil market, say US experts.
“This is a historic turning point,” Daniel Yergin, an energy historian, told the New York Times.
“The defining force now in world oil today is the growth of US production. The outcome of the OPEC meeting is a clear indication that the oil exporters now recognize that this is a new market.”
Thanks to a boom in hydraulic fracturing, the US has increased its crude oil production from around 5,100 barrels per day in 2008 to more than 8,000 barrels this year: in September 2014 production averaged 8,864. Confounding expectations that the fracking surge would be only short-lived, the US oil and gas industry has managed to increase its productivity thanks to technological innovation which allows greater volumes of oil and gas to be exploited from underground formations.
However, investments in the new extraction process could become unprofitable for explorers if oil prices drop too low, a weakness which OPEC wants to exploit. Venezuelan Foreign Minister Rafael Ramirez, who had argued for a cut in production, told Reuters on the sidelines of Thursday’s meeting in Vienna, “OPEC is always fighting with the United States because the United States has declared it is always against OPEC… Shale oil is a disaster as a method of production, the fracking. But also it is too expensive. And there we are going to see what will happen with production.”
According to data from Bloomberg, on Friday US WTI was down 10.23 percent at USD 66.15 a barrel, while Brent was priced at USD 70.15 a barrel, down 3.35 percent, for January settlement. On Thursday, Leonid Fedun, vice president of Russian Lukoil, said the OPEC decision will bring about a crash in the US shale oil surge. “In 2016, when OPEC completes this objective of cleaning up the American marginal market, the oil price will start growing again,” he told Bloomberg in an interview in London. (PNA/Sputnik)