A supply-side face-off in oil | FT Alphaville

A supply-side face-off in oil | FT Alphaville:

"As we alluded to earlier, there is a battle taking place in the oil markets at the moment.

On one side there are conventional oil producers like Opec members desperate to stop oil prices from following the declining trajectory of the wider commodity complex. On the other side there are the new US shale oil producers, who — due to the US export ban — are unable to capture the full earnings potential of their production (on account of an inability to tap foreign bids directly).

The problem for Opec types is that the break-even rates they seek to defend are now too high to prevent the new class of producer from being incentivised to keep producing. This despite the fact that the export bottleneck only ends up transferring much of the profitability to the refining sector instead of the US producer.


As pressures mount, it’s fair to presume that at some point something will have to give. One group will be forced by to scale back production, whether they like it or not."

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