OPEC policy on crude production will ensure a crash in the U.S. shale industry, a Russian oil tycoon said.
The Organization of Petroleum Exporting Countries kept output targets unchanged at a meeting in Vienna Thursday even after this year’s slump in the oil price caused by surging supply from U.S shale fields.
American producers risk becoming victims of their own success. At today’s prices of just over US$70 a barrel, drilling is close to becoming unprofitable for some explorers, Leonid Fedun, vice president and board member at OAO Lukoil, said in an interview in London.
The shale boom is on a par with the dot-com boom. The strong players will remain, the weak ones will vanish
Oil futures in New York plunged as much as 3.8% to US$70.87 a barrel today, the lowest since August 2010.
At the moment, some U.S. producers are surviving because they managed to hedge the prices they get for their oil at about $90 a barrel, Fedun said. When those arrangements expire, life will become much more difficult, he said.
In Russia, where Lukoil is the second-largest producer behind state-run OAO Rosneft, the industry is much less exposed to oil’s slump, Fedun said. Companies are protected by lower costs and the slide in the ruble that lessens the impact of falling prices in local currency terms, he said.
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image credit Zemlianichenko Jr./Bloomberg
