Page 109 - Mariners Cricket Club (Singapore) - Souvenir Magazine 2020

economies like the U.S. and China expanded
and increased demand sending oil prices
toward highs near USD $140.00 per barrel.
A side effect of these high prices, however,
was that it also made it profitable for non-
OPEC countries to develop and test new ways
of exploring and extracting oil at home. This
prompted the U.S. to develop new shale oil
extraction techniques to become profi table
producers in this high-price environment.
Growing presence of US as a dominant oil
producer
Although the 2008 recession temporarily
halted the development of shale hydraulic
fracturing technology in the U.S., the following
years saw a dramatic increase in fracking for
crude oil extraction. Because the U.S. is not
an OPEC member and does not have to abide
by its decisions, the country grew its domestic
supply levels, which eventually culminated in
the crash of global oil prices at the end of 2014.
Recent history of crude oil prices and
OPEC decisions: 2014-2019
OPEC production figures post-2014 moved
opposite to West Texas Intermediate (WTI)
price for a period of two years, attributed to
the organization’s decision not to cut crude oil
output. At the end of 2016, however, following
the decision to cut production for the fi rst time
since 2008, output decreased and has continued
that downward trajectory as cuts have been
extended to the end of 2019.
Despite this glut of oil on the market as 2014
ended, OPEC did not choose to cut production
levels. They chose, instead, to prioritize the
preservation of its market share and continue
producing at a rate near 30 million barrels per
day (mmbd).
Following this decision, WTI crude oil and
wholesale diesel prices fell close to 10% and
continued that downward trajectory before
reaching multi-year lows in 2016.
Ritik Sircar is mariner with a sailing
experience of 15 years and is now
a vessel manager with Diamond
Anglo Ship Management, Singapore.
Decisions to cut production to control
prices
With the oil market becoming increasingly
less profitable for the cartel and other non-U.S.
producers, OPEC and newly invested parties
like Russia soon began discussions to freeze
and even cut, production levels to add greater
stability to oil prices.
While the group initially had trouble arriving
at an accepted metric for these cuts, at the
end of 2016 the group reached a consensus.
The outcome of this decision was the fi rst
production cut OPEC had made since 2008 and
has since resulted in a period of prolonged cuts
by the organization.
These cuts remained influential price drivers but
have varied in the magnitude of their impact.
In June 2017, less than a year after OPEC’s
production decision, cuts were extended,
resulting in an increase of almost 40% by the
group’s meeting the following year.
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