Oil Price Narrative: OPEC v US Shale. Consider the oil price. From the summer of 2008 to first quarter 2009, the oil price collapsed from nearly $150 to under $40. The current narrative is that OPEC pumps at quota to lower the price to destroy US shale oil competition. Forget the US-Saudi fight against Russia meme. Thats just implausible. The critical phrase in the former narrative is full-cycle costs-- my Yukos friends explained this to me about a decade ago--and shale oil in many US regions has already locked up infrastructure and land, so running costs could be as low as $40, when US WTI is now about $68. OPEC made a severe error when they allowed oil to breach $100 because then suddenly shale oil became competitive. So, this game of lowering the oil price to smash US shale oil is not going to work in this cycle because forcing the smaller players into near-death only means bargain assets to the big boys. Result: even stronger competition against OPEC in the next cycle. Shorting to $30 still sounds plausible. [This is an example of a Traders View.]
Posted on: Tue, 02 Dec 2014 11:14:43 +0000
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