Aaron Menenberg — The Crafty Saudis: How They’re Sustaining Low Oil Prices

The oil market continues to be oversupplied and barrel prices remain low. It’s mostly the Saudis’ doing, and its part of their strategy to replace OPEC with a new Global Corporate Oil Board. The newest developing is boost in domestic refining and growth in their refined product exports. Where does everyone else stand, and where will this go?….

EconoMonitor
The Crafty Saudis: How They’re Sustaining Low Oil Prices
Aaron Menenberg

Nick Cunningham — Shale Rivals OPEC As Swing Producer

Although those two reports differ on the direction of oil prices in the short-term, they both underscore the flexibility of shale. With the oil bust, U.S. production is expected to contract, leaving latent production capacity in the ground. Unlike conventional fields, shale wells can be drilled quickly, and can be shuttered quickly. That makes U.S. shale, “as close to inventory-on-demand as oil ever comes,” as Steve LeVine at Qz.com puts it. 

This may not present the “existential threat” that Citigroup suggests, nor will it be “the end of OPEC.” OPEC is still exacting a very large influence over the price of oil. And whereas OPEC spare capacity can be directed by decision-makers at the top, shale output will fluctuate depending on the price of oil, outside of the control of market producers. But by having developed several million barrels per day in “spare capacity” that dozens of shale drillers collectively form, shale is acting as a swing producer.

Oil Price
Shale Rivals OPEC As Swing Producer
Nick Cunningham of Oilprice.com

J. Barkley Rosser — I Told You So On Oil Prices

… a week ago here I called a bottom to the oil price decline before anybody else in the world did, and it has held, with the price fluctuating between $44 per barrel and $51 per barrel. My post simply reminded the world what most of it had paid no attention to that the Saudis had publicly stated that they were planning their budget on the basis of a world oil price between $45 and $50 per barrel…

As Warren Mosler says, the swing producer is the price setter.

Econospeak
I Told You So On Oil Prices
J. Barkley Rosser | Professor of Economics and Business Administration James Madison University