OPEC has a bit weird view of how supply, demand and markets work. If the demand for oil is inelastic, cutting back on output should not only cause the price to increase but also increase gross oil revenues. The problem is that there are a lot of other non-OPEC players in the market that control a significant share of oil output. To the extent that OPEC tactics initially work, these other players will see this as an opportunity to INCREASE not decrease output to take advantage of the higher prices. As a consequence, gross revenues to the OPEC cartel might not increase by nearly as much as OPEC hopes, nor prices, as other non-OPEC players increasingly supply the oil OPEC is not producing and OPEC companies keep losing market share to non-OPEC countries.
OPEC's view of the world is that the cartel still has enough of a monopoly on oil production that by their actions they can significantly alter worldwide oil supplies and prices. I tend to believe otherwise, but the coming weeks and months should prove either me or OPEC correct. Actually, being an oil "producer" myself now, I wish OPEC all the best. I do tend to think that the crude markets right now are deeply oversold, but futures contract pricing for the moment has built into it the belief that we are headed into a deep, steep, long, global recession. I tend to not be that pessimistic about the future. And the steep decline we have seen in gasoline prices in recent weeks should be a factor in helping to mitigate the coming recession. Also, EOG and other oil producers always have the option of "slowing down the pumps" and pumping less oil than before in each month waiting for prices to rebound. THe mineral interest owners may grumble about lower current royalty checks, but oil not pumped today an still be pumped in the future when prices rebound. I'm not sure what all this short-term volatility does to drilling activity, but the cost of hiring a rig and crew must be starting to come down from 6 months ago, making wells cheaper to drill. One option is to keep drilling but simply not pump the new wells out as fast for now. On Oct 19, 3:52�am, "paul giannotta" <[EMAIL PROTECTED]> wrote: > There only objective is to get oil back to $100 per barrel! They have game > right out and said that! They will cut production until they recieve there > goal. They are cutting at 500,000 barrel at a time. Next cut will put it at > 1 million and counting, �at 40% of our total consumption they have some > "clout" Lets sit back and watch the power of the > turbine. > > ```````````````````````````````````````````````````````````````````````````�````````````````````````````````````````````````````````````` > > > > On Sat, Oct 18, 2008 at 7:32 PM, JDH <[EMAIL PROTECTED]> wrote: > > > I agree that they are dirt bags, but after they got a taste of $100 > > barrel oil I think that they will do anything to get it back. They are > > holding the cards. > > > On Oct 18, 8:04 pm, Larry <[EMAIL PROTECTED]> wrote: > > > What OPEC says they will do and what OPEC actually does are mutually > > > exclusive events. > > > > We will not know what OPEC has done or not done until prices start > > > of moving one way or the other. > > > > We have all seen the bank robber movies where the crooks start > > > cheating each other as they divide the loot. �That is my concept of > > > OPEC members. > > > > Believing an OPEC statement can be hazardous to your financial health. > > > > On Oct 18, 5:53 pm, JDH <[EMAIL PROTECTED]> wrote: > > > > > Correction Goes back to $100 barrel. > > > > > On Oct 18, 4:50 pm, JDH <[EMAIL PROTECTED]> wrote: > > > > > > Looks like OPEC is going to make sure oil stays at $100 barrel . If I > > > > > understand it right meeting today they decided to cut production by > > > > > half million barrels a day. Did anyone else understand different? > > Good > > > > > or bad?- Hide quoted text - > > > > > - Show quoted text -- Hide quoted text - > > - Show quoted text - --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "Bakken Shale Discussion" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/bakken-shale-discussion?hl=en -~----------~----~----~----~------~----~------~--~---
