OPEC VS LOW COST SHALE OIL PRODUCERS

Organisation of Petroleum Exporting Countries (OPEC) has been in a painful war with low cost shale producers for the last year over market share. It’s core Gulf members say they have resigned themselves to the idea that the U.S. shale industry’s high-tech flexibility means it will respond quickly when prices start rising again, making the United States the new swing producer in world oil, the role held for so long by Saudi Arabia.Experts say OPEC is looking for a longer-lasting impact on other high-cost production oil field plans, many in deep oceans, with bigger time scales, even if that means a period of cheap oil prices lasting for years.
However, the short investment cycle of U.S. shale, where it takes about few months before returns are seen, make it the most sensitive to oil price fluctuation — either way.The new period of low oil prices which may not see oil prices at $100 per barrel till 2020 has seen International Oil Companies (IOC) shifting grounds as they consider their cost- benefit analysis on various projects. Investments in many projects because of the time and cost structures,  have been delayed in the competition with low cost producers seeing  companies like BP, Total,Statoil postponing projects from the Gulf of Mexico, to the UK North sea, Nigeria and Indonesia.Many others will be postponed or delayed according to Norwegian consultancy Rystad Energy.Gulf producers  believe that low oil prices have so far been successful in stimulating demand for crude and will gradually impact the oversupply which will start to be more visible towards 2016 and beyond, a sign that Saudi Arabia’s new market share strategy was working.