By EM Bits
I’m not an energy expert by any means, but here are some basic collected thoughts on the topic ahead of the OPEC meeting on the 27, along with three interesting graphs at the bottom.
OPEC meets on November 27. The price of oil is off by nearly a third over the past five months. The key issue for investors is whether OPEC can (1) agree on a substantial cut in output to stabilize prices, and (2) avoid the members from cheating. In October, OPEC’s data indicate the cartel produced about 30.25 mln barrels a day. This is 250k barrels a day above their production agreement. So beware of the excitement from a substantial cut announced by OPEC.
Iranian oil is also a wild card. Today is the deadline for an agreement on Iran’s nuclear capability. Last minute negotiations were being held over the weekend. There have been some optimistic noises, and although a short extension may be needed, a deal looks to be at hand. This would end the sanction regime that has curtailed Iran’s oil sales.
US shale production. There are all sorts of numbers floating out there about what price of oil makes the US shale production unviable. Abdalla El-Badri, secretary-general of OPEC, has suggested half of US shale production would be knocked out by oil at $85. But a lot of people disagree. For example, energy expert Daniel Yergin argues that the lion’s share (80%) of the new output next year would be profitable at $50-$69 a barrel. In the first week in November, the US produced 9.06 mln barrels a day. Andrew Liveris, chairman and CEO of Dow Chemical says that oil at $75 won’t affect US output because investments in wells and production have already made.
Here are three interesting graphs:
Courtesy of EM Bits
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