Shale oil producers have been successful in cutting down their operating costs. They can now produce profitably even when oil prices are at sub-$50 levels.
Trouble in the Middle East… again
The middle of this week saw Iran’s parliament and the mausoleum of Ayatollah Khomeini, the leader of the 1979 revolution, being attacked by Islamic State terrorists and suicide bombers. Twelve people were reportedly killed.
Soon after the attack, Iran’s government indicated that the terrorists had the backing of Saudi Arabia without actually naming the country. Traditionally, the two nations have been rivals with both trying to dominate the region.
In another development in the Middle East, Saudi Arabia and several other countries have severed diplomatic ties with Qatar, accusing it of supporting the Muslim Brotherhood and ISIS.
Normally, whenever there is a crisis in the region, oil prices can be expected to rise. But this time around, the position is quite different. A falling-out between Saudi Arabia and Qatar and other OPEC members can actually lead to a fall in prices. This is because OPEC countries, in coordination with several non-OPEC oil exporters, have been trying very hard to cut production levels to shore up prices. Even Russia is a part of the effort to reduce oil output.
