We’ve been lulled into complacency by profits from $100/barrel, but market conditions are changing. As more and more U.S. shale oil is produced, the crude oil barrel price is dropping to $90, $80, $70… West Texas Intermediate fell to $77.91 on November 7th [oil-price.net]. The markets are saturated and neither OPEC nor U.S. shale are slowing down production. OPEC has to be worried about where the bottom price is heading.
The shale boom is redrawing global oil trade. Light, sweet shale oil is displacing other producers in refineries worldwide. On November 5, Canada’s Come by Chance refinery, on the far eastern tip of the country, has swapped out its mainstay Iraqi crude to run almost wholly on U.S. shale oil. More refineries will follow. On a related note, this is a boon to the chemist, catalyst and engineering companies helping those refiners figure out how to process their shale crude slate.
Can the weather save OPEC?
According to the Shale Energy Insider, Deutsche Bank oil analyst John Hirjee said that the current low price could be impacted before the end of the year, with an early and sharp US winter predicted demand for oil is likely to increase, “the northern hemisphere winter is a big demand season….apparently there’s a polar vortex to hit the US sometime next week. Basically, it’s a very big cold snap and that could start to draw upon inventories, and as inventories come down that could have a beneficial impact on oil pricing [for suppliers]“.
Children wanting to get out of school and snowplow salesmen pray for another polar vortex. No you know another reason. Winter is Coming!