The war between
United States and OPEC (led by Saudi Arabia) regarding who enjoys the power to
determine crude oil price seems to be getting bitter. Initially it appeared that neither of the
groups would voluntarily cut down production but now it appears both are
cutting production but at a different pace.
As the price
declined by almost 50% it started pinching all but shale producers felt the
real brunt. According to one of Bloomberg reports drillers have reduced the
number of rigs in service by 83 to 1,140, the lowest number since December 2011.
“We’re seeing signs
that the market is beginning to give greater weight in its pricing to the
likelihood that shale oil production in the U.S. will be cut over coming
months,” Ric Spooner, Chief Strategist at CMC Markets in Sydney, told newswire
service.
According to Baker
Hughes total U.S. rig count has declined by a record 435 in nine weeks. The
drop of 37 at the Permian Basin, the largest oil field of the US has been the
steepest since the services company began reporting basin-by-basin counts in
February 2011.
OPEC alone can’t
maintain “reasonable prices” and cooperation with producers outside of the
group is necessary, Venezuela’s Chavez said. A news indicates that Chevron has
cut output from Saudi-Kuwaiti oil fields.
According to some
scanty details crude production dropped by 20 percent since October at a venture
that Chevron Corp operates in the Wafra field, which Kuwait is developing in
collaboration with Saudi Arabia.
The Wafra project,
in which Chevron had planned to invest as much as US$40 billion, is one of the
world’s largest attempts to free heavy oil by injecting steam underground.
All eyes are set at
the next meeting of OPEC when Saudi Arabia, the largest producer and Kuwait, the
group’s third-biggest member will join other OPEC states to assess market
conditions and set production levels scheduled on June 5 in Vienna.
Reportedly, Kuwait has
stopped issuing work permits for Saudi Chevron employees at Wafra oil fields,
located in a shared neutral zone along Saudi Arabia because country’s ministry
of labor and social affairs halted services to the company.
