OPEC is losing control.
The signs have been there for a while.
U.S producers are upping output with rig counts soaring (currently at 877, up 462 from last year) and oil and gas companies are jumping in feet first.
That’s partially what led to the crash oil experienced last Thursday, with WTI Crude dropping to $45 a barrel…
Oil recovered somewhat over the weekend and is now at $46.45.
U.S. producers don’t seem too worried about the price drop. After all, when you play the oil game, you expect ups and downs.
U.S shale producers, like Halliburton, saw profits jump 24% in the first quarter even with oil at $50 a barrel.
But OPEC is fretting.
They’ve been desperately trying to curb oil production (with U.S. producers a thorn in their side) for months, and in November of last year Saudi Arabia, non-OPEC participant Russia, and Iran agreed to a temporary production cut.
Now, Saudi Arabia’s oil minister has said that they’re trying to extend the cut even further, perhaps even moving into 2018.
Bloomberg writes, “Oil has surrendered all its gains since their deal late last year to cut output… several nations have said they’d support an extension of the 6-month agreement that began in January. This is the first time the Saudi minister has suggested it could be extended beyond 2017.”
While the proposed cuts might help OPEC temporarily, they’re not a long-term solution.
OPEC might not realize it, but we’re past the point where oil has to be $60+ for U.S. shale producers to make a profit…
They’ve lost control. And they’re not getting it back anytime soon.