The collapse in crude oil price was increased by the Saudi-led OPEC decision to maintain production in the face of an emerging glut of supply. It is no secret that Riyadh wanted to knock out higher-cost production, with the obvious target the US shale industry which, after increasing US oil production by about a third in four years, was reducing the oil market share of the Organization of Petroleum Exporting Countries.
But Fadel Gheit, an analyst in New York with Oppenheimer & Company, told New Europe that Saudi Arabia ’s manipulation of the price will never kill US oil shale production.
“It will slow down but it will never, never kill it because companies will continue to be more productive, more efficient so the break-even point will continue to go lower. So Saudi Arabia is trying to arrange low prices but in the meanwhile Saudi Arabia itself cannot sustain much lower oil prices much longer,” he said.
“The shale oil producers are not going to go away because they cannot unlearn what they learned so they will slow down as oil prices go down but as soon as oil prices go up again back to the races, they’re going to increase production and will be more efficient and more productive and all the same,” Gheit said.
Meanwhile, despite dropping oil prices, US producers are pushing harder than ever to lift the ban on the export of raw crude, which was put in place in the 1970s after the OPEC oil embargo led to fuel rationing andhigh prices, leading to long lines of cars waiting to fuel up. Supporters see possible inroads in a Congress controlled by Republicans who generally are considered more receptive to oil exports, as well as some signs that the Obama administration may at least be open to consider changes to the longstanding policy, which bans the export of raw crude.
http://www.neurope.eu/article/saudi-arabia-cannot-kill-us-shale-production