According to the report of foreign media on the 15th, Saudi Arabia has actually started the global oil price war this month, designed to quickly suppress the oil production of the U.S.. However, it may take more than a year to slow down the oil drilling boom in the United States.
Many observers expect that the global oil prices’ continuous falling will rapidly suppress the drilling activities of shale oil in America. Slowing output growth will support the oil prices. Small producers that are vulnerable to the oil price fluctuations should slow spending to quickly cut the oil supply flowing into the market.
However, according to experts, although drilling operators are considering cutting the budget of 2015, the oil production will be likely to continue to grow in the next year, or even last until 2016.
They said that oil wells that has been drilled but not fractured would continue to drive production growth for several months. Many drillers have signed long-term contracts and do not want to give up the equipment and pay high fines. Moreover, these devices may soon come in handy. Most oil companies have completed production hedging for next year at higher prices. They are currently competing for contracts in 2016, in order to ensure revenue even if oil prices continue to plunge.
This is related to not only the drilling boom in America, but also global market structure. OPEC, led by Saudi Arabia, hopes to grab market share from American producers. Saudi Arabia said to the oil market personage in private that it could accept an oil price as low as $ 80 for one or two years, which is seen to aim at the United States producers. Kuwait and Iran then showed no plan for reducing production. Therefore, the oil prices were suppressed and the stock also dropped endlessly.
The continuous decline in the oil market for four months makes the price of Brent crude oil fall to $ 85 per barrel, the lowest in past four years. This is also the biggest challenge that American shale oil industry suffered in four years. Oil shale oil production pushes the oil production to reach a high point in decades. It all depends on how the oil industry deals with unfamiliar cheap environment. There are hundreds of different American companies that have drilled thousands of new wells behind the shale revolution.
