for Saudi Arabia
More and more market watchers are making the case that OPEC should just leave well enough alone and let the free market set the price. While trying to influence sentiment and fundamentals, on nearly a daily basis, OPEC has already destabilized the market and guarantees more uncertainty ahead.
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Petchem growth appears guaranteed for the coming decades with demand rising faster than GDP in non-OECD countries and limited substitutes in this area.
Experts disagree on the potential oil market impact from Saudi Aramco's IPO. Some argue that the Kingdom will choose a pump-at-will policy to please shareholders, while others see continued coordination with OPEC.
Markets are shrugging off OPEC headlines, with prices weakening and hedge funds liquidating long positions. The cartel may be missing the mark on its stated longer-term goal of stabilizing the market and preventing a catastrophic correction.
A recent study [indicates that] for every million barrels of oil taken off the market, the world oil price will rise by about $5 per barrel, given a baseline oil price of around $60 per barrel. This suggests…a large-scale disruption in Saudi Arabia could cause an upswing of 50 percent or more, and that a catastrophic regional disruption could result in the doubling of oil prices.” A 100 percent increase in oil prices could reduce U.S. GDP by around 5 percent.
OPEC’s strategy centers around restricting supply to the Atlantic basin since inventory data in the U.S. is the most timely and visible in the world. From February to early April, U.S. imports from Saudi Arabia have plummeted by about 462,000 b/d.
If oil demand were to peak, the industry would likely see a good bit of consolidation, but the situation would not bring about a collapse.
Despite shale’s resurgence, there are questions about how healthy the U.S. E&P sector is in light of higher price levels since November of last year.
Although the world is still in the midst of a seemingly perpetual glut, does a supply gap loom? Is peak oil demand imminent? Why is OPEC praising shale and meeting with hedge funds?