OPEC, fracking, and Rafael Ramírez

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feat_fracking_footprint_zoomYou know what’s hugely important and we don’t know much about? OPEC.

This article from today’s Wall Street Journal talks about the fracking revolution, and how it creates cracks (fracks?) within OPEC. Surprisingly, it seems like the Africans have a lot to lose from fracking. Not surprisingly, so does Nicolás Maduro.

The money quote:

Nigeria has been hardest hit because its light and low-sulfur crudes compete directly with shale oil, unlike Saudi Arabia’s heavier and more sulfurous crude. Other OPEC members who don’t serve the U.S. market, such as Iran, are also complaining. Muhammad Ali Khatibi, Iran’s envoy to OPEC, told The Wall Street Journal that a combination of rising U.S. shale production and tepid demand is bringing “the price down.”

While Saudi Arabia can tolerate lower prices, “there will be some members, like Venezuela, Iran who will struggle at $90,” said Amrita Sen, chief oil analyst at London-based Energy Aspects Ltd. The front month Brent contract for July settled at $102.62 a barrel Monday. Venezuela’s oil minister said on Monday that he would push for a cut in OPEC production if oil falls below $100 a barrel.

Yeah, good luck with that, Rafito.

1 COMMENT

  1. How sad would it be if the 5th Republic falls, after 15 years of record oil income, for the same reason the 4th fell ; low oil prices. ” the more things change,….”

  2. “Venezuela’s oil minister said on Monday that he would push for a cut in OPEC production if oil falls below $100 a barrel.”

    Oh boy we are doomed… soooo screwed…

    For me OPEC is nothing but a mob, is an organization with the purpose to fuel corruption, to create the monopoly of the oil business in the hands of bureaucrats and demagogues with mesiah complex.

    So long OPEC, we ain’t gonna miss you…

  3. Que pena me da para OPEC! and the countries that can’t live with $ 90 oil. Now they are whining after having fucked the world with their price fixing through adjusting supply for more than 50 years.
    I don’t want to see Venezuela suffering even more, but they had endless chances “to sow the oil” and becoming e.g. a petrochemical powerhouse, rather than inefficiently assembling vergatarios. Instead oil rent was plundered and spent in drunken sailor projects, while el (not so) bravo pueblo has been sitting idly by watching the diaster grow to incomprehensible proportions.

  4. http://blogs.marketwatch.com/energy-ticker/2013/05/29/god-has-spoken-and-hes-not-keen-on-the-u-s-shale-boom/

    Don’t celebrate too soon.

    “Hall told his investors that while shale wells are initially prolific, their production declines fast because “each well only taps a single pool of rock-trapped oil, rather than an entire reservoir,” the FT said.

    The letter, which the newspaper said it had seen it, went on to say it was “impossible to maintain production … without constant new wells being drilled,” which would result in high oil prices.”

    • You do realize that this is a sign of the apocalypse, right? Not that fracking is doomed. No, that a supporter of chavismo is taking a hedge fund manager at his word. Dogs and cats living together. Mass hysteria!

      Take it with a grain of salt that Mr. Hall realizes fully and well that his letter to his investors is going to be widely disseminated in the commodity/oil investment community. He’s in compliance with his disclosure and his position as far as the SEC is concerned, but its also a pretty safe bet that this is a lever to either move into a different position or out of his current one despite his claims that they remain committed to the long term outlook (particularly his 2015 Brent play, along with those in 2016, 2017, etc., which he didn’t disclose because he didn’t have to do so.)

      If I were a market mover and the value of my future longs had been hurt, is there a real downside to this letter for me? Why, no, none at all, as long as I make the correct registration statements. Except, you know, hedge funds aren’t always bound by those…

      Oh, not that it likely matters much, but his position, if he’s been holding it since at least the beginning of the year, has declined by about 10% or so since January.

      • Or you could just face reality that tight oil is nothing but an illusion in the long term. Well production collapse is not going to be fixed by rightwing wishful thinking.

        • And you think that Venezuela will manage to be exporting oil for 70, 80 years because current reserves are for that, right? And oil prices will keep rising? Because I tell you: even if they keep at this level, the economy is not doing good. Petrodollars become less effective every single day, my friend. Every single day.

        • There is no rightwing wishful thinking about this. No ideology at all, despite your desire to politicize it. It comes down to rates of return and the allocation of capital.

          When you take into consideration that the capex aspect of this is pretty high and yet, companies have been commiting to this for several years, apparently there must be some rate of return and that as long as oil prices remain sufficiently high, there will continue to be investment in this technology process…all of which puts downward pressure on the oil markets to move to a lower equilibrium price.

          You also must be assuming that the technology is fully deployed and no further advances will be made. Practical application of virtually every other technology in the world after introduction says otherwise. 5 years in and you think there will be no further efficiency gains or further developments that advance the ROI?

          But hey, completely ignore the fact that this guy has a vested interest in fracking failing and he has the capacity to impact markets based on what he says and therefore be advocating for his own agenda.

          I still find it hysterically funny a chavista would advocate for a capitalist’s desire to enhance his own financial position.

  5. The biggest threat to oil remaining a huge money maker for those that produce it is not shale oil ( although its bound to contribute to making conventional crude more vulnerable as time passes and new technologies make shale oil easier and less costly to extract), but the incentive high crude prices create for the future development of tehcnologies that minimize the worlds dependence on crude. Thats the real threat !!

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