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Posted On: 05/18/2017 9:08:45 AM
Post# of 103890
Re: LionsPride #12911
On May 25, the international oil cartel will gather in Vienna, Austria for their biannual meeting. In the past, the OPEC meeting was always a source of uncertainty for the oil market as the output policy has periodically influenced the price of the energy commodity. When the price of oil began to fall from highs in June 2014 because of increasing shale production from the United States, a Saudi-led OPEC policy of flooding the market with oil caused the price fall to $26.05 per barrel, the lowest price since 2003.
Last year, OPEC with assistance from another dominant world oil producer, Russia, abandoned their strategy and threw in the towel on flooding the market. Instead, the cartel announced a production cut that took effect in 2017. Crude oil rallied to above $50 per barrel and traded in a range from $47-$55 until recently. However, at above the half-century mark, shale oil from the U.S. began to flow once again as advances in technology and a friendlier administration in Washington D.C. when it comes to the regulatory environment have lowered the cost of production. Therefore, increasing U.S. output has offset production cuts by the cartel.
The three dominant oil producers in the world are Russia, Saudi Arabia, and the United States. While the cartel continues to attempt to control the price of oil, it is the three top producers that will dictate the path of least resistance for the energy commodity in the months and years ahead.
A triad establishes the price
As the oil ministers of OPEC travel to the May 25 meeting, they have to realize in the back of their heads that they have become even more of a toothless tiger than they were in the past. Last year, the Russians seized the opportunity to take control of the cartel's fleeting influence in the market. Russia played mediator between Iran and Saudi Arabia and delivered a band aid to the membership in the form of a $50 per barrel price. While less than half the price of oil in June 2014, $50 is a far cry from the lows of February 2016 which was a political and economic disaster for even the wealthy members of the cartel. Saudi Arabia will still have influence when it comes to the international price of crude oil, but they will be dealing with Russia and the United States rather than their cohorts in the cartel. With their IPO scheduled for 2018, the Saudis are now in a position to be squeezed by Presidents Putin and Trump. The tables have turned on the oil producing nation who led the cartel to flood the world with oil to increase market share. Russia delivered a higher oil price to the other members of OPEC over recent months, and they are likely to continue to follow "advice" from Moscow. When it comes to the U.S., President Trump's desire for energy independence requires him to take control of the oil wheel away from OPEC and the Middle East. Fewer regulations and technological advances will lower output costs for shale oil which puts the U.S. in the best position to influence the international price, or at the least respond to price changes, quickly and efficiently.
Last year, OPEC with assistance from another dominant world oil producer, Russia, abandoned their strategy and threw in the towel on flooding the market. Instead, the cartel announced a production cut that took effect in 2017. Crude oil rallied to above $50 per barrel and traded in a range from $47-$55 until recently. However, at above the half-century mark, shale oil from the U.S. began to flow once again as advances in technology and a friendlier administration in Washington D.C. when it comes to the regulatory environment have lowered the cost of production. Therefore, increasing U.S. output has offset production cuts by the cartel.
The three dominant oil producers in the world are Russia, Saudi Arabia, and the United States. While the cartel continues to attempt to control the price of oil, it is the three top producers that will dictate the path of least resistance for the energy commodity in the months and years ahead.
A triad establishes the price
As the oil ministers of OPEC travel to the May 25 meeting, they have to realize in the back of their heads that they have become even more of a toothless tiger than they were in the past. Last year, the Russians seized the opportunity to take control of the cartel's fleeting influence in the market. Russia played mediator between Iran and Saudi Arabia and delivered a band aid to the membership in the form of a $50 per barrel price. While less than half the price of oil in June 2014, $50 is a far cry from the lows of February 2016 which was a political and economic disaster for even the wealthy members of the cartel. Saudi Arabia will still have influence when it comes to the international price of crude oil, but they will be dealing with Russia and the United States rather than their cohorts in the cartel. With their IPO scheduled for 2018, the Saudis are now in a position to be squeezed by Presidents Putin and Trump. The tables have turned on the oil producing nation who led the cartel to flood the world with oil to increase market share. Russia delivered a higher oil price to the other members of OPEC over recent months, and they are likely to continue to follow "advice" from Moscow. When it comes to the U.S., President Trump's desire for energy independence requires him to take control of the oil wheel away from OPEC and the Middle East. Fewer regulations and technological advances will lower output costs for shale oil which puts the U.S. in the best position to influence the international price, or at the least respond to price changes, quickly and efficiently.
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