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The Saudi decision to let the market set prices and to pursue market share, has led to steep declines in crude and petroleum product prices. The decision also has impacted natural gas export prices negatively, since, for Russia's long-term supply agreements, they wholly or partially are indexed to oilprices.
“We think that banks are generally giving producers more time to improve financial health and that spring ‘16 redeterminations could be much tougher without significant commodity price improvement,” said Jonathan Wolff, an analyst with Jeffries, according to SNL. Maintaining access to finance can come at a price.
In the last quarter of 2014, in the face of possible oversupply, Saudi Arabia abandoned its traditional role as the global oil market’s swing producer and therefore it role as unofficial guarantor of existing ($100+ per barrel) prices. Prices rebounded to $60 for a few months, before falling once again below $50.
One casualty of the oilprice downturn could be the megaproject. For years, as conventional oil reserves depleted and became increasingly hard to find, oil companies ventured into far-flung locales to find new sources of production. The collapse of oilprices, however, could kill off the megaproject.
OPEC next gathers December 4 in Vienna, just over a year since Saudi Oil Minister Ali Al-Naimi announced at the previous OPEC winter meeting the Saudi decision to let the oil market determine oilprices rather than to continue Saudi Arabia's role of guarantor of $100+/bbl oil. percentage points.
Short-term pressures on oil markets are easing with the economic slowdown and the expected return of Libyan supply. But the average oilprice remains high, approaching $120/barrel (in year-2010 dollars) in 2035. Oil and the Transport Sector: Reconfirming the End of Cheap Oil. Click to enlarge. Electric vehicles.
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