RE:US shale message to opecUS shale is the game changer. The Sauds saw this two years ago and took action. From here on out, the Sauds will no longer be the swing producer. They have stated that message consistently throughout the past 16 months since they decided not to cut production. And their strategy is playing out exactly as they predicted. Once demand catches up with supply, and it will in the early part of 2017, then the Sauds and the rest of OPEC will be at full production and they will not have given up any market share. Then US shale will play the role of swing producer and will increase and decrease production in line with market demand. After 2017, the oil market will become an efficient supply and demand market. The downside to this strategy is that anyone waiting for the price of oil to significantly increase in 2016 will be sorely dissappointed. It simply will not happen. The price may spike into the low $40 range on occassion over the next 12 months, but I have no doubt that we will see the average price of oil somewhere in the $35 - $39 range for 2016. The bad news for this is that if IAE gets through its RBL in the spring - which both BMO and RBC analysts think they will - the company will be sold for a small percentage of what we were expecting even a year ago. My prediction is that it is sold somewhere in the $1.00 - $1.25 range in the summer, if the petrofac news release is accurate and we see the FPF-1 on site at the end of Q2. Anyone interested in listening to Al-Naimi speak to how oil will stay low for the next year should check out the CNBC site below. And listen carefully to what he is saying. In one of the clips he says that OPEC will simply follow the marginal cost curve to ascertain where the price of oil will sit. And by marginal cost curve he is referriing to the entire industry.
https://www.cnbc.com/2016/02/23/naimi-no-comfort-for-shale-oil-producers-but-pioneer-papa-says-sector-will-benefit-in-long-term.html