by Ben Geman, National Journal
World oil producers have put oil prices into a free fall, refusing to pare back global supplies in the hopes that low prices will derail the fracking-backed production boom in the U.S. and preserve OPEC’s power over world energy markets.
But global analysts are skeptical that the move will work.
The basic reason: Prices remain high enough to keep pumping. “Looking out there, it seems like there’s a huge amount of oil that can be produced at $60, $70 per barrel,” said Michael Lynch, president of consulting firm Strategic Energy and Economic Research, referring to the prices for Brent crude oil, a global reference point.
Oil prices fell to five-year lows in recent days before rebounding slightly. Brent crude oil is trading at around $70 per barrel, far off the $110 range reached over the summer, while West Texas Intermediate, or WTI ,the main U.S. benchmark, is currently trading in the $67-per-barrel range.
That doesn’t mean that the move by OPEC—a 12-nation cartel of oil exporters dominated by Saudi Arabia—won’t have an effect on U.S. production. And the steep drop in prices even before OPEC’s decision last week to maintain production has already created headwinds for the U.S. industry. Read the entire story.