The fall in oil prices for the consecutive three days does not build a state of calamity for OPEC, but the anticipation of extending the price drop trend could undermine the remaining strength in an organization. During the past few days, several reports have been released, which focused on the potential crisis defying the Organization of Petroleum Exporting Countries. According to several predictions, the organization has not been able to regulate the oil market.
This week, IEA (the International Energy Agency) directly cautioned the members of OPEC, particularly the new energy minister of Saudi Arabia, in its monthly Market Report. The agency commented that the continuously mounting oil surplus would worsen the situation in the next year.
Soon, OPEC members and Russia will again notice rising oil production by non-OPEC members that would further disrupt the market balance and mount pressure on the oil price hike. IEA said that OPEC, especially Saudi Arabia, has to cut oil production to regain control over the oil market. However, the production cuts would be quite harsh for Saudis who are at the leading positions in oil production and trading.
At present, the oil price is being traded at $55 per barrel, and the majority of the OPEC members are expecting the oil price to reach $70 per barrel to balance their budgets.
On a related note, Harold Hamm—Chairman and CEO of Continental Resources—informed CNBC that US shale oil producers consider fulfilling oil demand, but not go over it. They are aligning their production growth accordingly.
Increasing oil supply from the US, together with uncertain global oil demand trend, has confined the oil prices for this year, although OPEC and its allies have been trying hard to regulate the oil supply and prop up prices. Hamm is expecting that US oil production will ultimately exceed the value of 15 million barrels per day.