Thursday, November 27, 2014

OPEC To Choke Off US Shale Producers?

The sharp drop in oil prices is probably going to choke off a lot of investments going into the US Shale producers.The oil cartel decision not to cut production in face of weaker prices is to claw back market share from US shale producers.A lot of drilling going on in the US is on borrowed money and that will be closely scrutinized or turn off following the recent OPEC decision.This would  a test to see what really is the breakeven point of US Shale producers.If we see sustained low oil prices, some higher cost shale producers will go under.The Saudi (the kingmaker in the OPEC) is not simply being magnanimous in this instance.Meanwhile, the rest of the world who are in the non oil producing camp will continue to benefit from the extra kick generated by low oil prices in this game of chicken being played out between OPEC and the US Shale industry.

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