At a conference in Muscat, Oman, October 21, Abdalla El-Badri, OPEC’s secretary general spoke. Bloomberg quotes him saying that, “The economy remains the major worry, particularly in the short and medium term.” El-Badri is cautious of the international market, citing labor challenges in Europe, slowed growth for China and India, and the potential of the U.S. scaling back quantitative easing programs, as ways global factors can influence the oil conglomerate.
The Energy Information Administration (or, EIA) report for the week ending October 11, U.S. oil inventories increased by 4 million barrels compared to the previous week. The report also said that with “374.5 million barrels, U.S. crude oil inventories are above the upper range for this time of year.” According to MarketWatch, oil inventories have now risen for four straight weeks. Crude, brent crude, and natural gas all slipped today. Crude oil fell below $100 per barrel today for the first time since July.
The fall in crude oil prices and El-Badri’s remarks come almost two weeks after OPEC economists trimmed their fourth-quarter forecasts. The revised number dropped the amount of barrels per day (or bpd) by 230,000. Along with lessening fourth-quarter expectations, OPEC lowered its estimates for 2014 as well, down to 29.56 million bpd.
In their coverage of the revised numbers, Reuters attributed U.S. shale oil production as a likely contributor to non-OPEC oil output growth for 2014. Shale helped the U.S. to surpass Saudi Arabia as the top oil producer last week. The National, Abu Dhabi Media’s English publication, published additional quotes of El-Badri’s speech to the conference in Muscat. He wants OPEC countries to see how sustainable the U.S. energy revolution is. Far from decrying the shale output in the U.S. and Canada, he sees it as a welcome development, putting an end to thoughts of an oil shortage in the world. However, OPEC needs to increase its oil output to keep pace with production from new sources.
Reuters interviewed El-Badri in early October, he then said he was comfortable with output levels by OPEC. The news organization thought this might mean no large policy changes would be unveiled at OPEC’s December meeting. His speech may be another indication of that, with OPEC preferring to see how what, if any, are the long-term effects of U.S. shale production.
The demand is slipping in the U.S. The same EIA report stated that for the sixth week in a row, gasoline prices fell across the U.S. This is not attributable to shale output, and has more to do with the falling prices of oil per barrel. This is why OPEC is concerned about the global economy. Less demand for oil contributes to falling prices at places like the U.S. gas pump, resulting in a decrease in revenue for the oil rich countries.
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