The lack of decision on a unified output by OPEC during its Friday meeting has fueled fears that the current low price of oil will not go up for years, causing a massive drop in U.S. oil companies’ share values.
The ministers of OPEC member countries brought the Vienna meeting to a close on a conflicted note, not making a final decision on the amount of oil it should pump in total, as a group. While it seemed for a while that the group could come to an agreement on raising its current limit of 30 million barrels per day, Iran’s refusal to submit to any limitations until sanctions are lifted however, brought negotiations to a standstill.
Oil minister from Iraq expressed similar sentiments, bringing up the question of the need for a limit when no other group or country has to follow similar rules. This effectively allows all thirteen member countries of OPEC to pump as much oil as they want, and attempt in the process, to push out its rivals, specifically U.S. shale companies.
Stock Price Freefall
Worries of an oversupply immediately affected the price of oil, sending U.S. crude under $40 a barrel, while simultaneously knocking down the stock prices of U.S. energy companies. With the latest drop, and the fact that the prices have plummeted by over 50 percent during the year, there is now little expectation that prices will go above $50 dollars before mid-2017.
As a result, Continental Resources, Whiting Petroleum, and Oasis Petroleum among others, saw their shares slump by over 5 percent while some companies fared a little better, with Marathon Oil Corp and Hess Corp only slipping by one to two percent.
This situation is also leading to yet more oil drilling operations shutting down, with the number this week at just 545, around one third of the amount of rigs that were operating just a year ago.