“Saudi could end up with egg on its face if, as many industry analysts predict, they decide once again against slowing production, which could mean a further decrease in the price of oil per barrel,” Eberhart said. “This will not sit well with other OPEC countries who will likely be hit hard by an additional dip in price.” Eberhart said he expected them to put the pressure on Saudi Arabia to change its current course of action.
Last summer, when global crude prices began to fall, many industry experts expected OPEC to slash production to stabilize prices at its November meeting that same year. Instead, the cartel surprised everyone by deciding to keep producing oil at 30 million barrels a day in an effort to protect its market share against shale producers in the United States and Russia, who are also reluctant to trim output in hopes of protecting their market share.
However, this plan seems to have backfired. Despite its vast oil riches, Saudi Arabia was not immune to plummeting prices and was forced to look to its foreign currency reserves and bond markets to make up for its lost oil revenues. Although crude output in the United States did fall – it was down to 9.3 billion barrels a day in September, a figure 20,000 barrels less than in August – the pace of decline has recently slowed. In essence, U.S. oil has proven stronger and more resilient than expected and many companies have been able to stay afloat even while crude prices sink.
“Shale has once again proven its worth as a vital part of America’s oil and natural gas industry and our production has not slowed as dramatically as OPEC predicted,” Eberhart said. “Now there’s even more urgency within OPEC to slow production and it’s coming from its member nations that are struggling to keep their economies from going bankrupt. The question is whether or not Saudi Arabia will cave to the pressure or flex its ever-shrinking muscle.”
About Canary, LLC
After ten acquisitions and seven decades, Canary, LLC, is now the largest private wellhead service company in North America and one of Inc. Magazine’s 5000 fastest growing U.S. companies. Canary serves its clients and the public through quality drilling and production services, local charitable endeavors, and educational campaigns concerning our nation’s energy policies. Visit Canary at canaryUSA.com, fb.com/CanaryConnects, or @CanaryConnects.
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