OPEC Crude Gamble - Keiyo Asset Management

United States, January 23, 2015 (Newswire.com) - Members of the Organization of Petroleum Exporting Countries (OPEC) are still providing no real indication of moving to shore up oil prices despite a precipitous fall in recent weeks.

Concerns over geopolitics have eased somewhat and a strong US dollar has put prices under considerable pressure.

"The OPEC countries seem more interested in protecting their market share rather than trying to stabilize prices," added the Keiyo Asset Management energy analyst.

Nevertheless, even with the price of a barrel of Brent light, sweet crude at $88 and threatening to move lower, the Kuwaiti oil minister Ali al-Omair has suggested that a spot price as low as $77 a barrel would still be profitable for OPEC producers.

“OPEC believes – with good reason – that much of the oil being produced in Russia and by shale oil producers in the US would not be economically viable at lower price levels,” said a Keiyo Asset Management energy analyst.

Saudi Arabia and most of its fellow OPEC members rely on traditional deep drilling methods to extract their product from the earth but shale oil producers have to contend with far higher costs associated with hydraulic fracturing or ‘fracking’ when extracting oil from shale deposits.

“The OPEC countries seem more interested in protecting their market share rather than trying to stabilize prices,” added the Keiyo Asset Management energy analyst.

The twelve member nations of OPEC are scheduled to meet in Vienna, Austria when they will decide how much oil to pump during the northern hemisphere’s winter when demand can surge sharply depending on the severity of the cold weather.

“When it comes right down to it, OPEC knows that it has far cheaper production methods that US shale oil producers cannot compete with long term,” concluded the Keiyo Asset Management energy analyst.