Shale revolution hits
Since the OPEC meeting in Vienna last November, Saudi Arabia has been pushing for increasing its oil production without stopping at any level. Last month, it produced 10.3 million barrels of oil, which is the highest Saudi oil production so far. With such an increase in oil production, Saudi Arabia has to find new outlets or increase its market shares in the existing markets that it holds, and maintain at any price.
This is the gist of the Saudi oil policy, in consideration of the new suppliers entering the market in the future or arrival of new oil from Iraq and Iran. Saudi Arabia is also aware that it will gradually lose the US market to local suppliers and shale oil producers. The Saudi oil policy seems to have changed the moment it relinquished its historical role of swing producer. It is now focused on increasing its production, adding more outlets to its account and holding onto them. The shale oil revolution has hit OPEC so hard that it cannot be comforted.
OPEC is probably wishing for the shale oil to disappear but the fact that their wish will not come true will annoy this organization for years. Shale oil has found its way to the oil consumers and no one is capable of stopping this industry from growing. It is a known fact that any increase in the price of a barrel will add to its viability and strength for survival.
So far, the shale oil producers have succeeded in cutting the costs to $30-40 per barrel. Every time the production cost of a barrel of shale oil decreases, the headache experienced by traditional oil suppliers mainly the members of OPEC increases, as they cannot survive if the oil price is below $70. This is indeed a challenge for OPEC while all other oil producers are managing their costs and reducing them. Due to this reason, Saudi Arabia wants to increase its oil production and its market shares everywhere even if the oil prices remain low.
It is chasing the cash flow that will come with the production of higher volume of oil. However, is Saudi Arabia looking for grabbing the golden opportunity when the oil prices hit high levels? Nevertheless, it is now in the mood to increase its oil production to the maximum and satisfy all the needs and wants of the customers. Has Saudi Arabia's oil production of 10.3 million barrels with export of 7.9 million reached its limit or will the oil market witness more production from it in the coming years?
© Arab Times 2015
