OPEC Group Unlikely to Change Oil Output in Global Oil Price

OPEC unlikely to change oil output in 2015 despite recent sharp slide in global oil prices

30-Oct-14

OPEC is unlikely to change its oil output next year from this year's levels. The group is unlikely to cut the ceiling on its production at a meeting in Vienna on November 27. despite the recent sharp slide in global oil prices. “I don’t think 2015 will be far away from 2014 in terms of production”, said secretary-general Salem el-Badri as reported by wsj.com, " Don’t panic. I am sure the market will balance itself" Brent crude has slipped from around US$115 per barrel in June to just over US$87 per barrel. Some analysts now believe oil prices will only recover when some of the extra shale oil supply starts to be removed from the market, rather than when and if OPEC decides to start cutting production. Mr. el-Badri said tight oil projects typically need oil prices at $90 to $100 a barrel a day to break even. OPEC’s estimate of the price at which such projects become uneconomic is higher than most in the industry, including that of the International Energy Agency which says most tight oil production is sustainable at US$80 a barrel. He said, however, that the impact of lower oil prices on supply would only start to be felt next year as shale oil-producing companies would have hedged themselves against the price drop in the near-term. Oil company executives at the conference disputed OPEC’s view of the pain threshold for shale oil output. Marianne Kah, chief economist of U.S. oil company, ConocoPhillips , said oil prices would need to fall to $50 a barrel “to really harm oil production” in U.S. shale basins. According to her, 80% of the U.S. shale sector is profitable at a range of US$40080 a barrel for the West Texas Intermediate benchmark. BP PLC’s Chief Executive Bob Dudley said he didn’t think U.S. shale production was “doomed” at current price levels, pointing out that the “costs of production have come down.”