DENVER, Nov. 28, 2014 /PRNewswire/ -- The Organization of
the Petroleum Exporting Countries (OPEC) announced the decision to
continue current production levels of 30 million barrels a day
after the cartel's ministers met in Vienna. OPEC's Arab Gulf state members led by
Saudi Arabia, disregarded pleas
from the organizations more penurious members to stabilize dropping
oil prices by reducing oil production.
"American shale oil producers will definitely feel the
far-reaching effects of the Organization of the Petroleum Exporting
Countries' (OPEC's) decision to keep its oil output at robust
levels," said Dan K. Eberhart, Chief
Executive Officer of Canary, an oilfield services company based in
Denver.
The US shale energy boom has propelled US oil production to its
highest levels in decades, dramatically decreasing America's demand
for imports.
"The Arab Gulf State members' refusal to yield represents
economic hardships for cash-strapped, oil-dependent countries that
rely on higher oil prices for government revenue," Eberhart said.
"The likelihood of a continued free-fall in oil prices will make it
more difficult for US shale oil producers to fund new drilling
projects, pursue exploration and in some cases – simply continue
operations."
Slowing economies in Europe and
China have cut global demand even
further, resulting in significant global oversupply – and steadily
dropping prices. Eberhart said oil states such as Nigeria and Venezuela, will likely be forced to devalue
their currencies as oil revenue continues to falter.
"By holding fast to current production levels, Saudi Arabia is essentially saying that we
need to put a wet blanket on American shale," said Eberhart.
"American shale plays with higher production costs, such as the
Bakken in North Dakota, will be
affected more. Weaker or over-leveraged American oilfield companies
most likely will struggle – and may even be forced to close."
Historically, OPEC has taken the lead in stabilizing the global
market by adjusting production levels as necessary, but Gulf State
members with the resources to ride out a period of low oil prices
are capitalizing on the opportunity to dampen the American shale
boom.
"This decision did not come as a big surprise. OPEC has been
indicating this would be the policy for a few months: to keep
production high," said Eberhart. "The U.S. ban on exporting its
highly sought-after, light, low-sulfur crude oil is not helping
matters, Eberhart noted. "Exporting US crude would add more supply
to the world, which would help stabilize the price with constant
demand."
About Canary, LLC
Canary is America's largest independent wellhead service company
and one of the largest privately owned oilfield service companies
in North America. Canary operates
in every major American play, including North Dakota, Ohio and Texas. For more information, visit
www.canary-llc.com