OPEC, Saudi Arabia ‘no longer in control’ of oil prices

http://rss.cnn.com/~r/rss/money_news_economy/~3/H-QL76wZG0M/index.html For decades, OPEC's sway on oil prices was unparalleled.

But the cartel's immense influence has been dealt a huge blow by the dramatic boom in US shale.

"Saudi Arabia and OPEC are no longer in control," Douglas Rachlin, managing director at Neuberger Berman's Rachlin Group, said on Wednesday at the SALT Conference in Las Vegas.

The emergence of US shale as a key global player that can pump even during low oil prices means OPEC can no longer "manipulate prices," Rachlin said. "The shale revolution has changed a lot of things."

In a display of how much the pendulum has swung, OPEC sent a plea to the US earlier this month to stop pumping so much oil. The plea came after a flood of supply from US shale producers, especially in the Permian Basin of Texas and New Mexico, threw a wrench in OPEC's ability to stabilize oil prices.

"The reality is that the US is now...the swing producer," Michael Hintze, the billionaire founder of hedge fund CQS, said at SALT.

Hintze pointed to the prolific production out of the Permian Basin, which benefits from unique geology that allows multiple layers of rock to be fracked at the same time. The Permian has also capitalized on technological advances that makes it cheaper to drill for oil.

In recent days, OPEC has sought to calm nervous investors. Saudi Arabia and Russia sent oil prices rising after pledging to do "whatever it takes" to support markets, including an extension of production cuts until March 2018.

Still, Hintze said Saudi Arabia "cannot be the swing producer any longer because of its fiscal situation." The country has sought to break its dependence on the oil industry by launching Vision 2030, an ambitious program to reduce the country's dependence on oil and diversify its economy.

"Hopefully by 2030, I wouldn't care if the oil price is zero," Saudi finance minister Mohammed Al Jadaan told CNNMoney's John Defterios this week.

"The reality is who is left and who can push the global production curve around? It's the US," said Hintze.

Read Original Story...
HEADLINES
Canada, Mexico and Japan want to revive the Trans-Pacific Partnership free trade deal
OPEC seen extending output cuts as Saudi Arabia says most members on board
Oil prices rise as OPEC, other producers are expected to extend, deepen supply cuts
OPEC, Saudi Arabia ‘no longer in control’ of oil prices
Oil prices rise on growing expectations that OPEC will extend crude output cuts
‘Wannacry’ ransomware attack estimated at $4 billion in losses
About Kelvin Ching

I'm a professional Forex trader and I have been trading for over 7 years. I was a series 3 broker and a registered CTA with the NFA, the main regulatory agency in the United States, and I have been involved at the highest levels in commodity trading. I also have a background in Information Technology, graphics design, and programming... I'm the co-founder of CurrencyNewsTrading.com, a site dedicated to fundamental analysis and news trading.

Speak Your Mind

*

Newsletter

Zero spam.