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OPEC Forecasts Oil As Low As $40 For Next Decade

Tyler Durden's picture




 

Whether it is more posturing ahead of OPEC's June meeting is unclear but the message from 'sources', according to The Wall Street Journal is "OPEC won’t agree to go lower," with regard global market share (which has fallen from more than 50-% to just 32% currently). The cartel's latest strategy report forecasts oil prices won't reach $100 - “$100 is not in any of the scenarios,” in the next decade (and could drop below $40) with its most optimistic scenario $76 in 2025 (which only Qatar and Kuwait can cover expenditures with). “If they want to sustain the organization, they have no choice,” but to reintroduce production quotas, adding any concession by stronger members would be temporary.

A return to quotas?

 

As The Wall Street Journal reports,

The Organization of the Petroleum Exporting Countries doesn’t see oil prices consistently trading at $100 barrel again in the next decade, a pessimistic assessment that has the group considering the return of production limits to influence the market, according to a draft of the cartel’s latest strategy report.

 

The report, seen by The Wall Street Journal, predicts that oil prices will be about $76 a barrel in 2025 in its most optimistic scenario, a reflection of OPEC worries that American competitors will be able to cope with low prices and keep pumping out supplies. It also contemplates situations where crude oil costs below $40 a barrel in 2025.

 

“$100 is not in any of the scenarios,” said a delegate at the OPEC strategy presentation last week in Vienna.

 

...

 

The price crash, and OPEC’s inability to stop it, is of paramount concern in oil-producing nations that need petroleum cash to balance their budgets. Only two OPEC members - Qatar and Kuwait - can cover their planned government expenditures at $76 a barrel, according to data from the International Monetary Fund. Most members require prices to be well above $100 a barrel; Algeria needs them to be over $130, according to the IMF.

 

...

 

The report recommends that OPEC return to a production quota system that it largely abandoned in 2011 after fights over how much each country would get to produce. OPEC members have been reluctant to agree to limits because it restricts their ability to attract new business and most ignored their quota.

 

Now, the likes of Saudi Arabia and Iraq are pumping record levels of crude in a bid to keep or gain market share.

 

The production quotas scenario under consideration would allow the poorest members of OPEC to produce more. Though the report doesn’t mention any particular country, such a policy could make such members as Algeria and Venezuela more agreeable.

 

...

 

“If they want to sustain the organization, they have no choice,” the official said, adding any concession by stronger members would be temporary.

 

Under the draft OPEC strategy report’s recommendations, the quotas could kick in if OPEC’s share of the global market fell below its current level of 32%, officials said. The group once produced more than half the world’s oil.

 

“At one point, OPEC won’t agree to go lower,” one OPEC official said.

*  *  *
Still we are sure, the financialization of the oil markets, amid as Barclays notes - the huge disconnect between physical and futures markets - will keep the 28x dream a live a little longer for US energy stocks... even as Einhorn slays the Shale beast. Remember, The Saudis are fighting The Fed here and its mal-investment enabling free-money train.

 

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Mon, 05/11/2015 - 14:39 | 6081833 Bill of Rights
Bill of Rights's picture
Bernie Madoff's right-hand man who snitched on him dies before he can be sentenced

http://www.nydailynews.com/new-york/bernie-madoff-right-hand-man-ponzi-s...

 

How convenient...

Mon, 05/11/2015 - 14:44 | 6081860 richsob
richsob's picture

So this piece of shit was still walking the street a free man years after he did the dirty work for the prosecutors?  Oh yea, that's real fair.  Nothing suspicious about that at all.  Everything's on the up and up.  Move along now.  Nothing to see here.

Mon, 05/11/2015 - 14:47 | 6081876 Pinto Currency
Pinto Currency's picture

 

 

OPEC: oil prices always collapse during  hyperinflation.  Yep.

Mon, 05/11/2015 - 15:09 | 6082009 back to basics
back to basics's picture

No, but it does during a deflationary vortex. And that's what we are faced with now until CBs drop loads of money directly on people. Then we get the hyperinflation part. 

Mon, 05/11/2015 - 15:31 | 6082115 LawsofPhysics
LawsofPhysics's picture

Bullshit.  There is no deflation in anything required for a high standard of living.  Sure, if you want to go live in a mud hut, that's still cheap, although I don't know where you might safely do that.

You don't need to print to get hyperinflation.  Once faith in the fiat du jour is lost, no one will accept you fucking paper, period.  In addition, scarcity can be a real bitch.  Only if the human population starts decreasing would you get real deflation...

Mon, 05/11/2015 - 16:16 | 6082265 Paveway IV
Paveway IV's picture

"OPEC said..."

and then there was this a few minutes ago:

URGENT: Saudi Oil Firm Aramco Targeted by Yemen

The Arabic-language Al-Mayadeen television reported minutes ago that Aramco's oil facilities in Zahran have come under attack by Yemen's tribal forces.

 

Meantime, a tribal source said his tribe has pounded "Aramco's facilities in Zahran Asir in the Southern parts of Saudi Arabia".

 

Local people residing in nearby area said they have heard loud blasts at Aramco's oil installations and "smoke is spiralling up from the facilities".

 

Saudi oil companies have oil facilities both in Zahran in the Easternmost parts of the country near Bahrain and in Zahran Asir in the South.

The former House of Saud said nothing while boarding their private jets to parts unknown. What did we learn here? Class? "Don't fuck with angry tribesmen that can take out $50 million worth of your industrial infrastructure with a half-dozen well-placed mortar rounds."

Mon, 05/11/2015 - 16:20 | 6082325 Calmyourself
Calmyourself's picture

I wouldn't worry about it after all Allah sets the price..

Mon, 05/11/2015 - 17:29 | 6082593 AldousHuxley
AldousHuxley's picture

"That's what they said last time." - future is here today...Idiocracy

https://www.youtube.com/watch?v=Dky9voxjmCs

 

Mon, 05/11/2015 - 18:32 | 6082827 Theosebes Goodfellow
Theosebes Goodfellow's picture

Drop below $40 a barrel, meh, yada-yada. As long as Moonbeam Brown and Sacramento democrats keep fucking me with a new gas tax when prices drop, "What, (as Señora Clintonista says), difference does make?"

Gassed up today at the injun casino and paid $3.56 a gallon for mid-grade. What an ass-reaming. And my fellow villiage idiot statesmen keep voting for these vultures. Aaaiiiyyy, chihuahua!!

Mon, 05/11/2015 - 17:10 | 6082521 Captain Debtcrash
Captain Debtcrash's picture

Shocker there Saudi Arabia saying investment in oil exploration and production is a bad idea because the price of the underlying asset is going to fall by a third and stay there for a decade. Well if there isn't much production due to lack of investment who will control market share? Even if the price goes the other way?

No one knows where oil prices are going over the next 10 years, but some traders will think this call from the Saudis actually means something.

Mon, 05/11/2015 - 17:46 | 6082667 apocalypticbrother
apocalypticbrother's picture

Oil prices will find an equilibrium where zioscum like Musk (tesla) can stay aboard the tax payer funded gravy train and the oil mafia can get a get a good return also. around 75$ currently. Anyway it will be good when all this fracking is done and farmers can continue to making their own bit of people subsidized cash thru the Ethanol/corn scam

Mon, 05/11/2015 - 17:35 | 6082620 apocalypticbrother
apocalypticbrother's picture

Those tribesmen may have a couple chinese friends...

Mon, 05/11/2015 - 17:31 | 6082610 apocalypticbrother
apocalypticbrother's picture

Correct. We borrow against our future based on ever increasing growth. I looked at this when I was 7 and realized it was not sustainable. How the idea that carbon credits will work to control global warming and the stated  goal of 9 billion happy people on the planet can co-exist within the minds of the vast majority of our so called intelligencia is disturbing to me. Throw in some religious gogma and it is all kooky..

Mon, 05/11/2015 - 15:07 | 6081993 Hitlery_4_Dictator
Hitlery_4_Dictator's picture

If OPEC says 40 you all better prepare for 150-200

Mon, 05/11/2015 - 15:11 | 6082025 HenryHall
HenryHall's picture

Yep. One little civil war in Saudi Arabia will cure the $40 problem.

Middle East wars do have a tendency to spread like a cancer.

Mon, 05/11/2015 - 15:16 | 6082042 jdtexas
jdtexas's picture

Yep and OPEC Secretary-General Abdulla al-Badri said $200 from this report....but "the club" members are always full of s***!

OPEC sees oil prices exploding to $200 a barrel
Mon, 05/11/2015 - 16:08 | 6082268 macholatte
macholatte's picture

 

SCOOP

This just in from an unnamed and any-mouse source from ZH. A real insider who has his finger on the pulse, if you get my meaning, and confirmed by an outsider who has actually seen the inside of a NY apartment overlooking Central Park.  Here it is:

The price of oil over the next decade will definitely be somewhere between $40/bbl to $200/bbl and might even be somewhere in between depending on wihich day of the week it is and who you ask. That is absolutely definite.

Mon, 05/11/2015 - 17:09 | 6082516 Butterflying
Butterflying's picture

My last pay check was $9500 working 12 hours a week online. My sisters friend has been averaging 15k for months now and she works about 20 hours a week. I can't believe how easy it was once I tried it out. This is what I do... www.jobs-review.com

Mon, 05/11/2015 - 14:43 | 6081859 Caveman93
Caveman93's picture

Deflation....it's what's for dinner next decade!

Mon, 05/11/2015 - 14:57 | 6081929 LawsofPhysics
LawsofPhysics's picture

Deflation in everything not required for a high standard of living, yes.

Mon, 05/11/2015 - 15:20 | 6082075 oddjob
oddjob's picture

Except that dinner prices are skyrocketing.

Mon, 05/11/2015 - 14:46 | 6081873 Space Animatoltipap
Space Animatoltipap's picture

Some other "next decade" fantasies.

Mon, 05/11/2015 - 14:49 | 6081885 IntercoursetheEU
IntercoursetheEU's picture

Predictions about the future are always 100% correct, oops, 1.00% correct

Mon, 05/11/2015 - 14:49 | 6081887 DontGive
DontGive's picture

Not if the empire starts moon cratering Africa.

Looks like natural gas may be the play with export coming to a theater near you.

Mon, 05/11/2015 - 14:49 | 6081888 tony wilson and...
tony wilson and saturn zion devils's picture

the jewish house of saud
you are jewish royalty
yet the city of london
tel aviv and new york jewishers have stolen your gold.
saudi arabia is about to have a problem.
of the incoming exploding munitions type.
house of saud you chimps and apes you got less than a year.
let us all laugh and cheer.
cia,mi6,mossad aramco a little convoluted in the naming i admit but jews fellas taking over from jewish fellas is saturn satan all.

Mon, 05/11/2015 - 14:50 | 6081891 Never One Roach
Never One Roach's picture

Houston is diving into a mini-recession with thousands of highly paid engineers being laid off [including two of my buddies]. When you consider the median salary of these engineers is $185k, that's a big hickee.

Mon, 05/11/2015 - 15:31 | 6082117 fastrakn1
fastrakn1's picture

Were not feeling it yet, but I am sure we will in the next year. $185k per year is a lot here. You can buy a nice house for a years salary!

Still building down here like there is no tomorrow!

Mon, 05/11/2015 - 17:12 | 6082531 hardmedicine
hardmedicine's picture

I got a data point for you.

 

Rental houses in North Texas fracking paradise central were absolutely zero available and probably 25% Y/Y increase from DEC 2013  in  DEC 2014.... Just had a rental property go up there a week ago ......... not one phone call on it. 

 

The cracks are enlarging..... people bugging out of the  Lone Star State.  WE need more ILLEGALS............... /s

Mon, 05/11/2015 - 14:53 | 6081905 farmboy
farmboy's picture

I am predicting 240 $ a barrel

Mon, 05/11/2015 - 14:56 | 6081920 LawsofPhysics
LawsofPhysics's picture

The Saudis think that they can pump enough oil for the next 40 years to keep the price that low?

good luck with that.

Mon, 05/11/2015 - 15:14 | 6082039 HenryHall
HenryHall's picture

Do they think they can pump oil and be involved in a war at the same time for very long?

Mon, 05/11/2015 - 14:56 | 6081924 Evil Bugeyes
Evil Bugeyes's picture

SA is trying to kill off all those frakking frakkers, but so long as oil futures remain above $55, they just won't die. So they are trying to tank oil futures by issuing predictions of $40 oil. My prediction is $100 oil just as soon as the frakkers are eliminated.

Mon, 05/11/2015 - 15:00 | 6081952 Dr. Engali
Dr. Engali's picture

It's a good thing we filled up the strategic reserve at $120 a barrel and not $40. Imagine how stupid we would look if we got three times the amount of oil than we got for the same amour of fiat. Hopefully it will be there for the debt slaves of the future who have to pay for it to use.

Mon, 05/11/2015 - 15:02 | 6081966 Gunner
Gunner's picture

What the world - needs now - is war, sweet war.

Mon, 05/11/2015 - 15:02 | 6081968 dondonsurvelo
dondonsurvelo's picture

Thank god there won't be any wars in the Middle East for the next decade.  The ME is such a stable and peaceful place. 

Mon, 05/11/2015 - 15:10 | 6082016 Creepy A. Cracker
Creepy A. Cracker's picture

Awesome!!!  Time to upgrade my humongous SUV to an even more humongous SUV. 

Someone has to help warm this rapidly cooling planet.

Mon, 05/11/2015 - 15:39 | 6082156 venturen
venturen's picture

who would figure that the USA doubling production would affect prices....it is almost like CAPITALISM! 

Mon, 05/11/2015 - 15:49 | 6082193 NoWayJose
NoWayJose's picture

Conveniently announced a day after the Saudis announced they are on an $80 billion global shopping spree for down trodden oil assets?

Mon, 05/11/2015 - 15:50 | 6082198 The Count
The Count's picture

I am an economist with 30 years background, so trust me:

 

Any economic forecast more than a couple months out (at best) is ass wipe, pure and simple.

Here a little economist joke: Meteoroligits were invented to make the forecasts of economists look good.

Mon, 05/11/2015 - 16:23 | 6082336 Calmyourself
Calmyourself's picture

Nothing personal but that is not very funny as your two professions are both screwing the world right now..

Mon, 05/11/2015 - 20:47 | 6083216 The Count
The Count's picture

you make little sense. is the weather forecaster messing up the weather? obviously not, he just tries to forecast it. same with economists. the politicians, the boss, whoever, demand some kind, any kind, of forecast no matter how improbable. it's human nature always wanting to grab on to something.

Tue, 05/12/2015 - 10:55 | 6084960 Calmyourself
Calmyourself's picture

Really, does the weather forecaster who predicts climate change so his political masters can manipulate the energy consumption of billions for personal power have any culpability?

 

The Nuremberg defense does not fly around here pal..

Mon, 05/11/2015 - 16:22 | 6082333 rickv404
rickv404's picture

OPEC is full of it. Obamacare and so much else the Feds are spending on, will determine the price of oil.

Mon, 05/11/2015 - 16:31 | 6082343 Kirk2NCC1701
Kirk2NCC1701's picture

At that price, it puts one hell of a PAUSE button on the Peak Oil crowd.

By then I'd also expect increases in fuel and energy efficiency in cars, trucks, homes and appliances to offset demand. As will continued migration to Renewable energy sources.

So, Peak Energy (not Peak Oil) is the real issue, and I don't see this being a terminal problem unless the population keeps growing and the economies with them.

Mon, 05/11/2015 - 16:42 | 6082416 post turtle saver
post turtle saver's picture

looks like Novo Russia doesn't get to build its empire on US$ 100+ bbl oil... so much for that idea

love how the RTylers keep misdirecting the woe and misery to US shale producers, when we know damn well who hurts from this the most...

Mon, 05/11/2015 - 16:59 | 6082475 Chuck Knoblauch
Chuck Knoblauch's picture

OPEC selling oil for non-US fiat paper.

Paper backed up by 10 aircraft carriers.

No one is afraid of the US Navy anymore.

Mon, 05/11/2015 - 17:13 | 6082543 apocalypticbrother
apocalypticbrother's picture

So the way I understand this is that Exxon et al  want to use our money and Military to fight Middle eastern governments that our governments have long supported.So in the end we will have financed a war so our "enemy" will be payed more for oil and we will pay a higher price at the pump. The we can go back to financing the fracking that is killing this planet. All supported by the people that brought you the carbon tax...

Mon, 05/11/2015 - 17:39 | 6082636 earleflorida
earleflorida's picture

"Rejoice with the 'new' House of Saud"

Pepe Escobar @ 'the roving-eye' 5/8/15

http://atimes.com/2015/05/rejoice-with-the-new-house-of-saud/

Mon, 05/11/2015 - 18:03 | 6082733 kelley805
kelley805's picture

next recession will start in  ...

http://michaelekelley.com/2015/04/28/next-recession-will-start-with-this-country/

 

then the oil crash will ripple around the globe.

Mon, 05/11/2015 - 18:47 | 6082880 SweetDoug
SweetDoug's picture

'

'

'

But do the refiners give  ®å†$å$$? Of course not! Not when the oligopoly just raises the pump prices because there is not competition.

 

I'm afraid we've had 'reset' of the pump price to what it is now, at $50 bucks. Wait for $5-7 gallon gas.

 

•?•
V-V

Mon, 05/11/2015 - 21:10 | 6083304 TheRideNeverEnds
TheRideNeverEnds's picture

In related news: Lifetime lows confirmed set in oil.  

 

You heard it here first folks, the bottom is in!

 

Take a picture of /CL with a five handle now to show the future or they may not believe you were alive to see it cause next time oil trades with a 5 it will be $500.

Mon, 05/11/2015 - 22:51 | 6083568 Magooo
Magooo's picture

THE END OF CHEAP OIL  Global production of conventional oil will begin to decline sooner than most people think, probably within 10 years

 Feb 14, 1998 |By Colin J. Campbell and Jean H. Laherrre    http://www.scientificamerican.com/article/the-end-of-cheap-oil/

 

HOW HIGH OIL PRICES WILL PERMANENTLY CAP ECONOMIC GROWTH For most of the last century, cheap oil powered global economic growth. But in the last decade, the price of oil has quadrupled, and that shift will permanently shackle the growth potential of the world’s economies.  http://www.bloomberg.com/news/articles/2012-09-23/how-high-oil-prices-will-permanently-cap-economic-growth

 

HIGH PRICED OIL DESTROYS GROWTH

According to the OECD Economics Department and the International Monetary Fund Research Department, a sustained $10 per barrel increase in oil prices from $25 to $35 would result in the OECD as a whole losing 0.4% of GDP in the first and second years of higher prices.  http://www.iea.org/textbase/npsum/high_oil04sum.pdf

 

BUT WE NEED HIGH OIL PRICES: 

 

The marginal cost of the 50 largest oil and gas producers globally increased to US$92/bbl in 2011, an increase of 11% y-o-y and in-line with historical average CAGR growth.  http://ftalphaville.ft.com/2012/05/02/983171/marginal-oil-production-costs-are-heading-towards-100barrel/

 

Marginal oil production costs are heading towards $100/barrel http://ftalphaville.ft.com/2012/05/02/983171/marginal-oil-production-costs-are-heading-towards-100barrel/

 

Steven Kopits from Douglas-Westwood said the productivity of new capital spending has fallen by a factor of five since 2000. “The vast majority of public oil and gas companies require oil prices of over $100 to achieve positive free cash flow under current capex and dividend programmes. Nearly half of the industry needs more than $120,” he said http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/11024845/Oil-and-gas-company-debt-soars-to-danger-levels-to-cover-shortfall-in-cash.html

 

Sanford C. Bernstein, the Wall Street research company, calls the rapid increase in production costs “the dark side of the golden age of shale”. In a recent analysis, it estimates that non-Opec marginal cost of production rose last year to $104.5 a barrel, up more than 13 per cent from $92.3 a barrel in 2011.   http://www.ft.com/intl/cms/s/0/ec3bb622-c794-11e2-9c52-00144feab7de.html#axzz3T4sTXDB5

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