Tuesday, February 10, 2015

Nick Cunningham — Shale Rivals OPEC As Swing Producer

Although those two reports differ on the direction of oil prices in the short-term, they both underscore the flexibility of shale. With the oil bust, U.S. production is expected to contract, leaving latent production capacity in the ground. Unlike conventional fields, shale wells can be drilled quickly, and can be shuttered quickly. That makes U.S. shale, “as close to inventory-on-demand as oil ever comes,” as Steve LeVine at Qz.com puts it. 
This may not present the “existential threat” that Citigroup suggests, nor will it be “the end of OPEC.” OPEC is still exacting a very large influence over the price of oil. And whereas OPEC spare capacity can be directed by decision-makers at the top, shale output will fluctuate depending on the price of oil, outside of the control of market producers. But by having developed several million barrels per day in “spare capacity” that dozens of shale drillers collectively form, shale is acting as a swing producer.
Oil Price
Shale Rivals OPEC As Swing Producer
Nick Cunningham of Oilprice.com

1 comment:

Peter Pan said...

This reads as if the oil industry exists solely for the benefit and convenience of the customer.