Wednesday, December 16, 2015

Hope for Oil Price Rebound in 2016 Fading

* Outlook for the price of oil in 2016 looks weak.

* Why it'll take a lot for competitors to come to a production cut agreement.

* U.S. shale will remain resilient, but offshore and Canadian sands will struggle.

* There are no visible catalysts to provide support to the price of oil.

It's humorous to see headlines in the financial media bleating out the idea that the price of oil is crashing because of the decision by OPEC to do nothing to reduce production levels.

I've been on the record for a long time saying it's not going to happen, and there were a number of others, understanding what's really happening in the oil industry, coming to the same conclusion.

Maybe some were hoping it would happen, but the disruption caused from the emergence of the U.S. shale industry has forever changed the oil market landscape, and as Saudi Arabia is finding out, it doesn't matter how much supply is brought to market, it is here to stay.

What that suggests is oversupplying the market won't be able to destroy shale. It does mean the days of Saudi Arabian dominance are coming to an end because eventually it'll have to influence other OPEC members to lower production in order to support the price of oil. It will either lose revenue by maintaining or increasing production levels, or lose revenue by lower production and losing market share. There is no third option.

more on 2016 oil price outlook

No comments:

Post a Comment