The extraordinary shale oil boom might have given a sigh of relief to the United States, which is one of the world’s largest oil importers. But it’s a big cause of worry for other countries like Russia, Saudi Arabia, Iran, Qatar and other major oil producers. They fear that the increase in U.S. shale oil production will bring down prices.
Saudi Prince concerned over shale oil boom
Last week, Saudi Arabia prince Alwaleed bin Talal, who has multi-billion dollar investments in Citigroup Inc. (NYSE:C), Time Warner Inc. (NYSE:TWX) and News Corporation (NASDAQ:NWSA), made Saudi Oil Minister Ali Al-Naimi aware of the threats of rising U.S. shale oil production to the Saudi economy. Prince Alwaleed Bin Talal said that shale oil boom in the United States will take business away from the OPEC countries, reported CBNNews. Most of the Middle East economies depend on revenues from oil exports.
Dan Loeb's Third Point returned 11% in its flagship Offshore Fund and 13.2% in its Ultra Fund for the first quarter. For April, the Offshore Fund was up 1.7%, while the Ultra Fund gained 2.3%. The S&P 500 was up 6.2% for the first quarter, while the MSCI World Index gained 5%. Q1 2021 hedge Read More
Last Friday, Azerbaijani newspaper Trendz reported that the troika of Russia, Iran and Qatar have signed an agreement to stabilize oil prices during the Gas Exporting Countries Forum (GECF) summit in Moscow last month. They predict that the U.S. will soon start exporting oil and gas to Japan and other Asian countries, eating into their markets. And they won’t be able to compete due to much lower prices of shale oil.
Russia could lose market share in Europe
Russia has ruled the European oil market for decades with state-owned Gazprom OAO (MCX:GAZP) (OTCMKTS:OGZPY) as the main oil supplier in the region. But now the country is concerned that Gazprom OAO (MCX:GAZP) (OTCMKTS:OGZPY) may face problems selling gas in Europe. A study conducted by Baker Institute estimates that Russian’s share in the European oil market will decline from 27% in 2009 to less than 13% in 2040.
Futures Magazine reports that the shale gas revolution in the U.S. will become problematic for Gazprom OAO (MCX:GAZP) (OTCMKTS:OGZPY). The economic development ministry in Russia believes that Gazprom OAO (MCX:GAZP) (OTCMKTS:OGZPY) will have to make its investments more efficient. Otherwise, rising number of spot contracts in the market and increasing shale oil production in the United States could prevent Gazprom from maintaining high prices in European markets.
The members have Gas Exporting Countries Forum (GECF) have about 60% of the global gas reserves.