OPEC says the demand for oil – its oil – will rise during 2015 because the cartel is winning its price war against US shale producers by driving them out of business.
“Higher global refinery runs, driven by increased [summer] seasonal demand, along with the improvement in refinery margins, are likely to increase demand for crude oil over the coming months,” the cartel said in its Monthly Market Report, issued, April 16.
The United States appears to have been OPEC’s chief target when, at its November meeting in Vienna, its members, under Saudi leadership, agreed to maintain production at 30 million barrels per day despite falling prices caused by an oversupply of oil.
The initial oversupply came mostly from a boom in US shale production, which was turning Americans from OPEC’s biggest customer into a competitor. But shale oil extraction requires hydraulic fracturing, or fracking, which is more expensive than conventional drilling and isn’t profitable if the price of oil falls below a threshold of about $60 per barrel.
The US producers are beginning to feel that price pinch, the OPEC report said, quoting data gathered by Baker Hughes, the large US oilfield services company, that the oil rig count in the United States fell by 238 in March, leaving a total of only 1,110 rigs operating in the country as of March 15. It also pointed to a declining number of drilling permits.
As a result, OPEC said, it expects that US supplies of oil will increase to around 13.65 million barrels a day in this year’s second quarter, but then flatten and begin to turn down for the rest of the 2015. This applies to Canadian production as well. “US tight oil and Canadian oil sands output are expected to see lower growth following the recent strong declines in rig counts,” the report said.
Full article: OPEC Says US Oil Boom Will End This Year (Oil Price)