OPEC Optimistic On Increased Oil Prices As U.S. Shale Production Loses Its Grip

As the Organization of Petroleum Exporting Countries wins the price tussle U.S. shale producers, the cartel is hopeful that the demand for its oil will rise in 2015 and prices will soar.

OPEC had stated in its Monthly Market Report, published recently that: “Higher global refinery runs, driven by increased seasonal, summer, demand, along with the improvement in refinery margins, are likely to increase demand for crude oil over the coming months,”

The cartel, which has the plan of pushing the U.S. shale producers also forecasted demand at an average of 29.27 million barrels per day in the first quarter 2015, a rise of 80,000 bpd from its previous prediction made in its March report.

It said its own total output will increase by only 680,000 barrels per day, less than the previous expectation of 850,000 barrels per day, due to lower US and other non-OPEC production.

The report also noted that the United States appears to have been OPEC’s chief target when, at its November meeting in Vienna, its members, under Saudi leadership, agreed to maintain production at 30 million barrels per day despite falling prices caused by an oversupply of oil.

The initial oversupply that hit the market came mostly from a boom in US shale production, which was turning Americans from OPEC’s biggest customer into a competitor. But shale oil extraction requires hydraulic fracturing, which is more expensive than conventional drilling and isn’t profitable if the price of oil falls below a threshold of about $60 per barrel.