Surging global oil production could drive prices down as low as $20 per barrel “for a while” and bring about the end of the Organization of Petroleum Exporting Countries (OPEC), Citigroup reported earlier this week.
“The U.S. shale oil revolution has broken OPEC’s ability to manipulate prices and maximize profits for oil-producing countries,” Bloomberg notes. U.S. production won’t likely begin to slow down before the third quarter of the year, “Brazil and Russia are pumping oil at record levels, and Saudi Arabia, Iraq and Iran have been fighting to maintain their market share by cutting prices to Asia. The market is oversupplied, and storage tanks are topping out.”
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As a result, “it looks exceedingly unlikely for OPEC to return to its old way of doing business,” wrote Edward Morse, Citigroup’s global head of commodity research. “While many analysts have seen in past market crises the end of OPEC, this time around might well be different.”
Citigroup expects benchmark West Texas Intermediate crude to drop as low as $20 per barrel, rebound to $75 by the end of the year, and average $54 for the year.
