Reality is a harsh school.
A few years ago OPEC tried to drive U.S. shale producers from the market by flooding the globe with crude.
Some North American producers folded, but many did not. Those that survived improved their profitability dramatically. By reports many shale fields are now money makers at $30 per barrel or less, well below the current West Texas Intermediate price of around $51 a barrel.
Shale production is flexible and rapid. Drillers can explore and develop new sources and ramp up or mothball existing fields as market prices dictate. American shale producers are largely responsible for a nearly 10 percent jump in U.S. output this year.
On Tuesday OPEC General Secretary Mohammed Barkindo of Nigeria asked U.S. shale producers to support plans to cut global supply. “We urge our friends in the shale basins of North America to take this shared responsibility with all seriousness it deserves, as one of the key lessons learnt from the current unique supply driven cycle,” Barkindo said.
It is a plea that will likely go unheeded.
Chief Market Strategist
WorldWideMarkets Online Trading
Charts: Alpha Trader, Thomson/Reuters
West Texas Intermediate
Crude Production OPEC & United States