Energy

OPEC Intensifies Oil War, Further Devastating US Shale

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Steve Birr Vice Reporter

The oil price war is intensifying as OPEC relentlessly pumps crude, flooding the U.S. with imported oil and undercutting shale companies as low prices gut the industry.

Later this month, 10 tankers of crude oil from Iraq will be delivered to U.S. ports, as Iraq pumps at its fastest rate since 1962 to compete with OPEC giants like Saudi Arabia. It will be the largest monthly increase of Iraqi oil in the U.S. since 2012, according to Bloomberg. This fresh influx of crude imports comes as long-term cheap oil drives down America’s energy outlook for 2016.

The Energy Information Administration revised their 2016 projections Wednesday, downgrading their expectations for domestic oil production in the new year. Bloomberg reports that oversupply worldwide, created by OPEC’s refusal to cut production, has devastated the shale industry’s ability to produce oil at a competitive price, leading to rig closures throughout the sector.

“In the longer term, we expect the U.S. to have to increase imports next year by some 500,000 barrels to 800,000 barrels a day year on year,” said Steve Sawyer, the head of refining at London based consultant FGE. “Given our projections for Iraqi output, it could well come from here.”

Houston based Noble Energy, a large shale company, announced Tuesday that it will lay off 180 employees, 60 of whom will be from their Texas operations. The company notified its workers earlier in the day as they move to consolidate expenses in the wake of long-term cheap oil. Noble Energy’s holdings in Colorado will also be affected, as the company will be cutting 70 jobs at its Julesburg Basin just north of Denver, reports Denver Business Journal.

“Noble Energy today announced that it is adjusting the size of its organization to reflect anticipated activity levels and the ongoing price environment while preserving long-term opportunities,” said Noble spokeswomen Reba Reid.

Oil’s future is extremely uncertain at the moment as OPEC’s actions, driven by Saudi Arabia, will create a lot of volatility in the market for the foreseeable future. The International Energy Agency released a report on Tuesday outlining their expectation that oil is not likely to recover above $80 a barrel until 2020, reports Reuters.

Executive director of the IEA Fatih Birol said, “In the last 25 years, we have never seen two consecutive years where the investments are declining and this may well have implications for the oil market in the years to come.”

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