Interesting story ---
And it’s only beginning. In the next several months, pipeline capacity in West Texas’ Permian Basin shale fields will expand by about one million barrels a day. That capacity will be taken up quickly by new production that had been held back only by lack of a way to get it to market. According to the Energy Department, drillers have sunk almost 4,000 Permian wells that are simply waiting to be fracked. In months, the Permian could be pumping enough to meet all of next year’s global demand growth—all from a single shale play.
Now suppose Venezuela restores order, Iran gives up its nuclear ambitions, and the U.S. lifts its sanctions against both countries. This would unlock another gusher of three million barrels a day and flood global markets. Oil prices would crash. While that would be a win for consumers at the pump, it could cause chaos in the U.S. oil patch
The only thing keeping global markets from falling into abject glut are offsetting production cuts by some of the world’s largest producers. Saudi Arabia has voluntarily cut production by 700,000 barrels a day as part of an OPEC quota system. U.S. sanctions have caused Iranian production to fall by 1.5 million barrels and Venezuelan production by 1.3 million. Considering the dollar values involved, this could be history’s largest shift of global market share for any product over such a short time.
With an initial public offering of Saudi Aramco in the works, the last thing Saudi Arabia wants is either an oil-price collapse or a war with Iran. So despite the outrage over the weekend’s attacks, the kingdom is unlikely to retaliate in any destabilizing way. In December it is likely again to bear most of the burden of production cuts to support prices.