OPEC Policy Ensures U.S. Shale Crash

American producers risk becoming victims of their own success. At today’s prices of just over $70 a barrel, drilling is close to becoming unprofitable for some explorers

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Oil futures in New York plunged as much as 3.8 percent to $70.87 a barrel today, the lowest since August 2010.

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At the moment, some U.S. producers are surviving because they managed to hedge the prices they get for their oil at about $90 a barrel, Fedun said. When those arrangements expire, life will become much more difficult, he said.

SOURCE: Bloomberg

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OPINION / OBSERVATION:

What the article didn't mention is ... U.S. Offshore-Production.

The U.S. Federal Govermnemt (thru its "Offshore-Leasing") rakes in approx. 30%-Royalty-Fees from "U.S. Offshore Production".

I have the "OPINION" that Offshore-Producers need $95-ish-per-Barrel to Break-Even ... ( i.e. Cost-of-Production ).

My "OBSERVATION" (If my "OPINION is correct) is that U.S. "Offshore-Production" will also be affected ...

AND

U.S. Federal-Revenue will also ... DROP!

(in case anyone's interested, I also believe the Onshore-(non-shale)-Cost-of-Production is 60+ish and the U.S. Federal Royalty-Tax on this Production is 15%)

PLUS

The Saudis will be the BIG-WINNERS in this scenario where the U.S. will have to import/buy Saudi-Oil to make up for any shortage of U.S. total oil production.
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They can't risk making people rich doing shale drilling. The top one percent don't want to be five percent. They do not want more of their kind, they want more customers.

I'll enjoy the cheap gas till the shale drillers go bankrupt.

Your figures of cost are way too high. The cost for barrel to acquire the oil is between twenty five and forty bucks a barrel. Shale oil can be competitive with that on a large scale. This cost does not include refining.

What a surprise.

OPEC policy on crude production will ensure a crash in the U.S. shale industry, a Russian oil tycoon said.

www.bloomberg.com...

originally posted by: rickymouse
They can't risk making people rich doing shale drilling. The top one percent don't want to be five percent. They do not want more of their kind, they want more customers.

Hmmm ... "Star-You" for the Additional-Insight.

(i.e. you could be partly-correct)


For more of the unusual ... Price-of-Oil:

The Other Part Of The "Secret Deal" Between The US And Saudi Arabia

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Along with $WTIC (Crude Oil) ... $GOLD, $SILVER and $COTTON are down too

( f.y.i. cost to grow cotton ... approx $0.65 per pound )

$COTTON Chart
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a reply to: FarleyWayne

Saudi Arabia to pressure Russia, Iran with price of oil



Saudi Arabia will force the price of oil down, in an effort to put political pressure on Iran and Russia, according to the President of Saudi Arabia Oil Policies and Strategic Expectations Center.

www.zerohedge.com...


I wonder what Mr. Fedun (your first source) thinks about that.

a reply to: Phage

The trouble is that 'Russian oil tycoon' will suffer far more, and is right now, due to U.S. production. Russia's profit/viability is somewhere around what the price of oil is now.

Also missed is big oil suffers from this production. Their known and developed reserves as well as their '50 year plans' are completely knocked out of kilter by these 'little guys' and their shale production....

So it's official, everyone hates it...

Therefore I LOVE it...

a reply to: nwtrucker

The trouble is that 'Russian oil tycoon' will suffer far more, and is right now, due to U.S. production.

NATO sanctions are probably not helping his situation either.

a reply to: FarleyWayne

Now the price on their charts includes all overhead of the financial empires, including all bribes...I mean contributions...and piping and hauling charges. It also includes their extravagant offices on Corporate expenses.

My prices were only including the cost of the well head oil. That did include well development and expenses for labor.

I'm sure the big corporation offices, corporate Salaries, and contributions would add many bucks to the oil acquisition cost.

" OPEC Policy Ensures U.S. Shale Crash "

I smell a new war coming.

A war that will affect the price of oil.

originally posted by: xuenchen
" OPEC Policy Ensures U.S. Shale Crash "

I smell a new war coming.

A war that will affect the price of oil.

I must lean-towards your thinking.

(i.e. be sensitive to saber-rattling-news).

If this does begin to become more-obvious ???

Also, consider the (dramatic?) ]USDRUL Chart
(US-Dollar-to-Russian-Ruble-Conversion-Rate).

OPINION: prices (of everything) can rebound in the Blink-of-An-Eye.

( i.e. thinking about additional dangers in oversea-shipping )
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From what Ive been hearing from my friends in the Oil and Gas Industry, is that US Shale is profitable anywhere above $50/barrel

I think OPEC is trying to see how far Prices need to drop, before the US starts laying down Rigs.

The Price Point at which the US begins to lay down Rigs is a closely guarded, Industrial Secret...and the Saudis WANT to know that Price.

BUT at the moment, many OPEC Countries' Budgets are having Budget Shortfalls with Oil being less than $85/barrel.

They are taking a temporary injury, to find out a huge secret.

I just wonder if OPEC can handle the lower prices itll take to squeeze out US rigs

a reply to: FarleyWayne

I just made a thread about that, and the Russian connection
www.abovetopsecret.com...

Eta: I think the shale oil thing is a smoke screen. The drop in price and the economical and looming threat of ww3 is the real reason oil production is at an all time high. As someone else pointed out to me, it's a bad omen. Putin is exchanging petrodollars for gold from the west's reserves. Once that's depleted and a gold standard is brought back it's checkmate. The ironic mistake of the US manipulating gold values and inflating the dollar is being used against them. Not to mention, Russia has now cut off coal to Ukraine. This is all political and economical warfare leading up to a crescendo. I don't buy OPEC's reasons.

originally posted by: Dustofenese
From what Ive been hearing from my friends in the Oil and Gas Industry, is that US Shale is profitable anywhere above $50/barrel

In my honest OPINION ... Shale-Oil Cost-of-Production is in the Mid-$80s.

Shale-Oil-Producers have to continually go back into these wells (additional-fracking) to keep them Producing.

( i.e. initial-production falls off quickly on these wells )
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originally posted by: Phage
I wonder what Mr. Fedun (your first source) thinks about that.

He thinks that the oil coming from shale and sands will hit the break point long before the oil from Russia will.

In that regard he is correct.

Not that it matters, the Saudi target isn't Russia.

a reply to: peck420

Not that it matters, the Saudi target isn't Russia.

According to the source provided by the OP Russia is one of the targets.

originally posted by: Phage
According to the source provided by the OP Russia is one of the targets.

Russia's current break point is within a couple of dollars of Saudi Arabia.

For Saudi Arabia to crash them, they will have to crash themselves.

a reply to: Phage

but not according to the russian tycoon

The U.S. needs to pull "ALL" of our troops and support out of the middle east and let these people do what they will with each other.

Maybe the Saudi's can get Russia or China to do there dirty work and kill a few of there 20 year olds for the sake of keeping THERE oil priced right.

a reply to: FarleyWayne

its not only about hurting Russian oil prices, USA shale oil ventures being bought up by the global oil corps...

its about the blackmarket sales of Iraqi oil by ISIS, Iran oil... UAE oil replacing Saudi as the big dog...

a lot is hidden.... including the overlooked fact that the USA instructed Japan to "QE-to-infinity" their Yen (and the plunder of the Japan Government Pension funds) , to make the USD stronger...
the USA, in turn, told Saudi/OPEC to keep the flow of production high so the price stays low for Japan to buy the needed/required Oil at the subsidized (in effect) price

its all a game of cards.... the USA now thinks that the Yen carry-trade is over & the globe supports only the USD,
that's why there has been no USD decline in buying power... even with some $30 Trillion more of USDs swamping the global glut of dollars during the last 6-7 years

In case anyone's intrested ...

Today (in one day) Crude-Oil ($WTIC) PLUNGED $7.48 to $66.00.

(i.e. an over 10% plunge in one day).

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PERSONAL-ASSUMPTION: Sheer-Panic is occuring on Oil-Street.
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