Silver Ridge Resources says OPEC’s strategy of maintaining full production is succeeding in squeezing US shale oil producers out of the market.
According to Silver Ridge Resources, oil cartel, OPEC has claimed that it is prevailing in its efforts to preserve market share at the expense of high-cost oil producers in Brazil, Russia but particularly in the US fracking industry.
The cartel’s refusal to reduce production has been widely blamed for prices plunging as low as $46 a barrel but Vivian Ericsson, commodities research chief at Silver Ridge Resources pointed out that while the precipitous price falls culminated in greatly reduced income for OPEC members, they also had the very desirable effect of crushing US shale oil producers who cannot operate profitably in a sub $80-a-barrel environment.
“The deep pockets of the two biggest OPEC producers, Saudi Arabia and Kuwait, meant they were able to endure the subdued prices for their product but the shale oil producers were forced to shut down oil rigs at the fastest rate in decades,” said Ericsson.
Asked if the shale oil producers would simply bide their time until oil prices returned to levels above $80-100 a barrel, Ericsson said that while it was inevitable that some would restart production, many would find it difficult to raise the funding necessary to finance production on the scale seen before June 2014.
“A lot of investors had their fingers burned in the debt markets when they lent money to ambitious producers who suffered cash flow problems when prices dipped below $80 a barrel so how much of an appetite they’ll have next time around is open to debate but we’d be very surprised if US shale oil production got anywhere near the levels we saw in the first half of 2014,” explained Ericsson.
Silver Ridge Resources has a price target for West Texas Intermediate of $60 a barrel in 2015, rising to a $65 average in 2016.
About Silver Ridge Resources:
Founded in 2005, Silver Ridge Resources is an independent, full-service brokerage, investment planning and management concern committed to delivering innovative capital appreciation and preservation solutions to individuals and families with a high net worth. We place the welfare of our clients and their families first and we pride ourselves on having become the first port of call for their financial affairs. We consistently exceed our clients’ expectations by going the extra mile in terms of attention to detail, delivery of service and, most importantly, returns on investment.
From our headquarters in Shanghai, China and offices around the Asia Pacific region, we currently oversee the deployment of over $4.5 billion of assets on behalf of clients both in Asia and around the world.
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