wolfstreet.com / by Wolf Richter •
The global oil glut, as some call it, is caused by the toxic mix of soaring production in the US and lackluster demand from struggling economies around the world. Since June, crude oil prices have plunged 30%. It drove oil producers in the US into bouts of handwringing behind the scenes, though they desperately tried to maintain brittle smiles and optimistic verbiage in public.
But everyone in the industry – particularly junk bondholders that have funded the shale revolution in the US – were hoping that OPEC, and not the US, would come to its senses and cut production.
So the oil ministers from OPEC members just got through with what must have been a tempestuous five-hour meeting in Vienna, and it was not pretty for high-cost US producers: the oil production target would remain unchanged at 30 million barrels per day.
“It was a great decision,” Saudi Oil Minister Ali al-Naimi said with a big smile after the meeting.
Saudi Arabia and other Gulf states were thus overriding the concerns from struggling countries such as Venezuela which, at these prices – and they’re plunging as I’m writing this – will head straight into default, or get bailed out by China, at a price, whatever the case may be.