The U.S. benchmark oil price dipped below a key threshold Thursday: $90 a barrel. Global demand is soft, and on the supply side the world seems awash in petroleum.
That’s put some key supplier countries in a tough position, with some choosing a potential price war. On Wednesday, Saudi Arabia’s national oil company indicated it’s still pumping — and selling at a discount to customers.
“They cut those prices across the board,” says IHS Energy analyst Jamie Webster. “And in particular they have cut them very sharply for Asia.”
It reflects a changing world. In the words of a frequently cited 2012 report from Citibank, North America may be a new Middle East.
Citi co-author Seth Kleinman says oil fields in Texas and North Dakota now pump so much oil, U.S. crude imports have fallen by 3 million barrels per day over the past nine years. Measured by net imports – imports minus exports of crude and petroleum products — the decline in import dependency is 8 million barrels.
“You used to have a big home for OPEC oil on the U.S. Gulf Coast,” Kleinman says. “The U.S. Gulf Coast is completely jammed. So Asia is really all you’ve got left.”
In the fight for market share, OPEC producers seem to be scrambling with everyone else.
It could all push prices down even more. That’s good for American drivers, not so good for American drillers if prices fall from $90 to the mid-$80s, according to several analysts.
“Clearly in the U.S. markets, what you would see is cutting back on investments, specifically on drilling and fracking,” says Quantum Reservoir Impact CEO Nansen Saleri, formerly of the Saudi national oil company.
Saleri notes American oil is comparatively expensive to produce. So if prices fall further, he says, some U.S. drillers would struggle and North American output growth would likely decline.