Reactions to Delaware Basin news shows misunderstanding of petroleum economics (Or the end of OPEC) by Dr. Daniel Fine

[bluewill + 4]

The full article by Dr. Daniel Fine is here-> https://www.daily-times.com/story/money/industries/oil-gas/2018/12/18/delaware-basin-news-reveals-public-misunderstanding-oil-industry-economics/2282224002/ "This writer has warned that world oil demand is sluggish and imprecise with only references to legacy guesswork that the developing world plus China demand will support prices long term or forever. Yet, world oil consumption has increased only 5 percent in the last 10 years.  

OPEC, with Saudi Arabia as its leader, has expired as the world administrator of the price of crude oil. At its December meeting in Austria, Qatar quit after nearly 70 years and announced concentration in LNG production and world export as the existing market leader.

OPEC emerged with a serious factional split between OPEC original and OPEC with Russia. There would have been no agreement without Russia and its old Russian Federation members as producers. Moscow is the new world oil price-setter indirectly while OPEC Original becomes a collaborator in cartel for now. Simply put, Saudi Arabia no longer is the “residual supplier” alone.

The production roll-back of 1.2 barrels per day by both “OPEC” is not enough for “balance” supply and demand for world crude oil.  It is being tested daily by commodity traders. In a briefing to New Mexico independent and small producers before the meeting in Austria, this writer warned that 1.7 million b/d was needed for balancing stabilization. Without that size of a production and export reduction, the average price of WTI oil in 2019 will average $50 per barrel.

Nearing 12 million b/d and over the Permian producers voluntarily will be required by this price to revise capital spending and place production into DUC (non-completions) and storage. There is doubt that the export of tight or shale oil would continue if the Brent price falls lower and loses its premium over WTI. A net cutback of Permian between 500,000 to 750,00 b/d should be a non-OPEC response to an oil glut even.."

[NWMan + 89]

This article again portrays OPEC as dead and or disorganised.  During the last meeting there were headlines that OPEC could not agree or they had to asks Russia.  Most negotiation with Arab countries are all agreed in advance.  Day one of the OPEC meeting was the formal discussion of who was to cut what.  This was dependent on Russia agreeing to cut as well.  Russia formally agreed on the second day.  All done no fuss.  OPEC plus agreed a sensible long term strategy to manage the oil market.  Maybe the short term oil traders of America can explain how the price of oil rocketed to $86 and has now dropped to $56 based on a few rumour of an economic downturn.