The shale oil supply puts new pressure on oil price
It seemed that the deep fall of the oil price would have had a strong impact on the shale oil industry. In fact, it has had for some time. That’s the reason why investors didn’t expected the numbers of rigs in the US, to rise the past week, and that’s the reason why the price of oil remains low. At London’s ICE Future exchange a barrel of oil was priced at $61.60 this Friday. Investors are starting to believe that the industry can still continue to make profits at a $60 price, thanks to the concentration of the sector in place and thanks to the cost cutting.
According to analysts of the sector, the oil market is currently oversupplied by around 2 MLN barrels a day and this is mainly because of the shale oil boom, as the OPEC organization hasn’t decided yet any further increase of the shares per country. Lately, the shale oil industry events are having more impact on the price of oil than the Saudi Arabian decision on oil production. This must be considered as one of the most important facts in the global oil industry.
How is the Golf State responding to this new world order? The last decision to allow foreign investors to buy domestic securities is a sign that Saudi Arabia is looking to diversify its economy, just like the other golf state, the United Arab Emirates. The world’s largest oil exporter, now estimates to attract around $40 BN on its domestic stock market, that’s 15% of the total market capitalization.
Suddenly, the country open its market to the foreign investors. That’s not because, they need investments that can’t effort by themselves but essentially they want to sent a strong message to the world that Saudi Arabia is a new country with a new perspective. This also can be considered as an opportunity for macro hedge funds to diversify their portfolios.