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Saturday, November 29, 2014

How Low Can Oil Prices Go?

It may be difficult to believe but as mentioned in my previous post, this is a new era for oil.

And the next question to ask is how low can oil prices go? 

Well, if the analysts were correct, the oil can still go lower...and it might fall a lot more.

OPEC's decision not to cut production was obvious: to put and cause pain to US shale drillers, but it's providing holiday gift for consumers. OPEC members Thursday followed the lead of Saudi Arabia, which has said it did not want to cut production and has made it clear it will defend its market share against other producers.

Those producers include the U.S. shale industry, which has helped boost U.S. production by a million barrels a day in just a year. OPEC member Venezuela sees the world oversupplied by 2 million barrels a day.

And if the US oil production were to continue to increase, the oil prices will definitely fall even lower. This is very likely to happen especially over the next three to four months as shale oil and Gulf of Mexico projects that are underway get completed.

The increase in production is likely to happen because of the investment that has already been made in the Gulf of Mexico. The OPEC's decision will definitely impact the US industry and while US will cut back on existing wells, even then, it will continue to see production growth over the next couple of months even with low prices.

It will no longer be about $70 or $60? Or is it $50? 

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