OPEC Non-Action Will Lead to a U.S. Shale Crash "on Par with Dot-Com Boom", Says Lukoil Vice President

by Ship & Bunker News Team
Friday November 28, 2014

The Organization of Petroleum Exporting Countries' (OPEC) decision to leave its production ceiling alone is likely to cause the U.S. shale gas industry to crash, according to the vice president of Russia's OAO Lukoil, Bloomberg reports. 

OPEC announced yesterday it would keep its limit of 30 million barrels per day despite rapidly declining oil prices caused by a massive oversupply in the industry, in part due to the outpour of production from the U.S. shale gas industry. 

"In 2016, when OPEC completes this objective of cleaning up the American marginal market, the oil price will start growing again," said Leonid Fedun, who is also a board member of Lukoil.

"The shale boom is on a par with the dot-com boom. The strong players will remain, the weak ones will vanish."

With oil prices at just over $70 per barrel, drilling is quickly becoming unprofitable for some producers, said Fedun. 

Some U.S. players, he said, are currently only surviving by hedging the price of oil to $90 per barrel, but the strategy cannot continue into the long term. 

OPEC yesterday reportedly entertained the option of cutting its production limit by 5 percent, but in the end did not follow through. 

Ship & Bunker News Team
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