The world oil market - 06/02/2016

The Day That OPEC Died: Saudis Aim to Bankrupt Cartel, Seek Oil Monopoly
The oil export alliance failed to reach an agreement to cap production on Thursday. Saudi Energy Minister Khalid al-Falih again walked away from the table as the kingdom looks to consolidate market share.

Sputnik,

2 June, 2016

The collapse in negotiations, along with a forward-looking refusal by the influential Saudi delegation to consider capping production, means a free-for-all fight for market share among the world’s oil producers that is all but certain to lead to collapsing oil prices.

Economic analysts have already raised the alarm that oil-export dependent countries like Venezuela, Algeria, and war-torn Libya, who lack access to global credit markets, will be unable to weather the storm, leading to humanitarian crises and widespread social strife.

Why is Saudi Arabia pushing for overproduction?

In February 2016, world oil prices cascaded to $27 per barrel, down from a July 2008 peak of $145 per barrel, as the Saudis ramped up oil production from a 2009 dip. In the midst of the 2008 market crash, Saudi’s top oil official, Deputy Crown Prince Mohammad bin Salman, called for the kingdom to immediately increase oil production to 11.5 million barrels of oil per day, and then to 12.5 million barrels daily by the end of 2016.

Energy market analysts initially scoffed at the aggressive move to undercut world oil prices, noting that Saudi Arabia’s own budget is dependent on a $66.70 per barrel oil price, with oil-extraction prices much higher for other OPEC countries. Market watchers predicted that Saudi Arabia would eventually push the oil alliance to cap production so as to keep prices at economically sustainable levels.

Saudi Arabia instead sought to increase market share when competitor peers were at their most vulnerable. North American oil producers, unlike Saudi Arabia, are not state-sponsored enterprises propped up by government handouts during down markets. When these US and Canadian oil resource industries fell into bankruptcy they became ripe for capture by foreign investors.

As energy analyst Marin Katusa told Radio Sputnik, Saudi Arabia has swooped into the North American energy market, through private equity firms, buying US and Canadian fracking technology and oil fields at pennies on the dollar.

Similarly, the kingdom looks to rebuff efforts by other OPEC members to expand oil market share. By pushing oil prices to their lowest level in years, the Saudis look to not only bankrupt Western oil companies, but also render insolvent entire oil producing states in order to snatch up foreign oil resources on the cheap.

Oil prices have recovered some in recent months, to $49 per barrel, due to oil disruptions in Canada after the Fort McMurray fire and oil extraction remaining offline in war-torn Syria, Iraq, and Nigeria.

Before Thursday’s OPEC meeting, Radio Sputnik sat down with Justin Dargin, Global Energy Scholar at the University of Oxford to discuss the fracturing of OPEC and the kingdom’s plans to corner oil energy markets.

Do OPEC member states face a fiscal crisis if an agreement is not reached?

"Yes, the breakeven oil price, which is the price that most OPEC member states need for their budgets to remain solvent, for most Gulf States, is between $80 and $100 per barrel, to maintain their budgetary outlays without having to go into some kind of major deficit," said Dargin. "The price currently is not viable for the long term, but I believe there is this sentiment for the OPEC members that prices may rebound in the future."

The analyst suggested that the market rebound over the past few months may be little more than an oasis for the smaller, fiscally-strapped OPEC member states, based primarily on seasonal demand changes, especially an increase in demand during the summer for air conditioning, travel, and leisure.

Dargin noted that he does not expect that market prices will recover in the near-term, citing a lack of structural changes in the market after prices collapsed to a low of $27 in February.

Can smaller OPEC member states survive these historically low prices?

"We can see already that in the case of Venezuela that they are not weathering it very well and they don’t have as much sway in OPEC as other members," said Dargin. "It will be quite hard for Venezuela and the smaller producers to encourage or force Saudi Arabia to come to an agreement."

"Many of these smaller oil producers like Venezuela and Algeria will not be able to weather the storm and it will be a very rough road ahead," he said.

The Tanker Armada Off Singapore Starts To Unload As Gasoline Goes Into Backwardation

Zero Hedge,

2 June, 2016

The story of the unprecedented build up of various commodity tankers off the coast of Singapore, as well as everywhere else, has been duly covered here as well as the reasons behind it.

  Notably, two weeks ago we cautioned that with the contango no longer leading to profitable offshore storage of oil, many shipping companies would have to start offloading their cargo, or as we recently reported, have started incurring debt to fund said storage costs in hopes of avoiding shifting storage to land:

[S]toring oil on ships can be profitable when prices for future delivery of crude are higher than in spot market, a term structure known as contango, as long as future prices are high enough to offset tanker charter costs. However, with the one-year contango for Brent futures collapsing from $7.60 per barrel in January to just $4, far below the $10 that traders say is currently required to make floating storage financially attractive, suddenly parking oil offshore leads to storage losses. The same goes for WTI. 

At a charter cost of more than $40,000 a day for a Very Large Crude Carrier (VLCC) that can store 2 million barrels, the contango is nowhere near steep enough to make it profitable to store oil on tankers for sale at a later date.

This has led to a dramatic development in the oil market: debt-funded storage. Reuters writes that the need to store oil is so strong that traders are calling up banks to finance storage charters despite there being no profit in keeping fuel in tankers at current rates.

"We are receiving unusually high amounts of queries to finance storage charters," said a senior oil trade financier with a major bank in Asia. "These queries come from traders fully aware that they will not make a profit from storing the oil. This isn't a trade play, it's the oil market looking for places to store unsold fuel," he added.

As we warned, this is a very dangerous idea, and one which only works if oil prices continue rising; meanwhile it is only a matter of time before much of the 200 million barrels in oil parked offshore have to come back on land. But while we wait for the offshore oil glut to start being offloaded, one place where tankers are already delivering their wares is in the massively glutted gasoline market.

As Reuters reports, the number of tankers storing gasoline in waters off Singapore and Malaysia is dwindling as the fuel is sold off or shifted to cheaper onshore storage because of changes in forward delivery terms. With the economics of storing the fuel on tankers no longer viable due to a stronger forward market, there are now fewer than three long-range (LR) vessels holding gasoline in the area.

According to Reuters, citing traders, by the end of this week all remaining tankers could be discharged as the fuel's owners seek to sell the gasoline or store it more cheaply onshore. "It's not economical to store gasoline on ships now compared to before unless they have no buyers or land storage," said one Singapore-based gasoline trader with knowledge of the deals. Ships recently used to store gasoline were chartered by Statoil, Total, Vitol, Gunvor and Unipec, trading arm of China state refiner Sinope.

A typical LR tanker can store 55,000 to 75,000 tonnes of gasoline, depending on the size of the ship.

The reason why gasoline cargos are now starting to be aggressively offloaded is that the gasoline market forward price curve will flip to backwardation from July, meaning lower prices for future deliveries than for those sold immediately. That contrasts with the contango structure for the first-half of the year, with future deliveries more expensive than prompt cargoes, making it attractive to store gasoline for sale at a later date. A month ago, April in the forward curve was about $1 a barrel below May, with the June price about 30-40 cents below July. This contango will flip into backwardation from July.

The current weak market is in part due to an expected fall in gasoline imports from top regional consumer Indonesia, where state oil firm Pertamina is expected to reduce imports later this year as it negotiates deals to make more of the fuel. Even if the stored fuel is not sold, traders are shifting the gasoline into onshore tanks because they estimate it costs at least $100,000 less a month to hold the fuel on land.

According to Reuters, Chinese gasoline exports are also up more than 50 percent for the first four months of the year, although going forward, China could scale back its volumes. "Maintenance in May and June, particularly at (Chinese) teapot refiners will ... lower gasoline output," analysts at BMI Research said in a note to clients this week, while strong Chinese demand would help tighten the regional market.

Perhaps, but meanwhile Chinese gasoline stocks have never been greater as the country imports tremendous amounts of gas which apparently has no end-user demand, which is forcing China to store even more of it, both on land and in the sea.

And now that the curve is about to enter backwardation, all that gasoline stored at sea is about to come back to land, and bring China's gasoline stocks to even higher record levels.

In other words, the global glut is now not only at the crude and distillate level, but also in global gasoline stocks.

It also means that contrary to conventional wisdom that Chinese end demand is driving global consumption, China is merely storing copious amounts of the refined crude production chain in land and on sea, in hopes demand comes back. So far it is failing to do that. 

And now, we await for the crude contango to tighten further and force some of the 200 million barrels of oil held at sea to come back on shore, where it will have to be promptly sold as much of the world's onshore storage is practically full.

The Untold Story Behind 

Saudi Arabia’s 41-Year U.S. 

Debt Secret

How a legendary bond trader from Salomon Brothers brokered a do-or-die deal that reshaped U.S.-Saudi relations for generations.

Bloomberg,

30 May, 2016

Failure was not an option.

It was July 1974. A steady predawn drizzle had given way to overcast skies when William Simon, newly appointed U.S. Treasury secretary, and his deputy, Gerry Parsky, stepped onto an 8 a.m. flight from Andrews Air Force Base. On board, the mood was tense. That year, the oil crisis had hit home. An embargo by OPEC’s Arab nations—payback for U.S. military aid to the Israelis during the Yom Kippur War—quadrupled oil prices. Inflation soared, the stock market crashed, and the U.S. economy was in a tailspin.

Officially, Simon’s two-week trip was billed as a tour of economic diplomacy across Europe and the Middle East, full of the customary meet-and-greets and evening banquets. But the real mission, kept in strict confidence within President Richard Nixon’s inner circle, would take place during a four-day layover in the coastal city of Jeddah, Saudi Arabia.

The goal: neutralize crude oil as an economic weapon and find a way to persuade a hostile kingdom to finance America’s widening deficit with its newfound petrodollar wealth. And according to Parsky, Nixon made clear there was simply no coming back empty-handed. Failure would not only jeopardize America’s financial health but could also give the Soviet Union an opening to make further inroads into the Arab world....[ ]

To read article GO HERE

Saudis on't budge on oil prices

SAUDI OIL MINISTER: I Don't Care If Prices Crash To $20 -- We're Not Budging

Business Insider,

22 December, 2014

Saudi Arabia convinced its fellow OPEC members that it was not in the group’s interest to cut oil output however far prices may fall, the kingdom’s oil minister Ali al-Naimi said in an interview with the Middle East Economic Survey (MEES).

OPEC met Nov. 27 and declined to cut production despite a slide in prices, marking a shift in strategy toward defending market share rather than supporting prices.

“As a policy for OPEC, and I convinced OPEC of this, even Mr al-Badri (the OPEC secretary general) is now convinced, it is not in the interest of OPEC producers to cut their production, whatever the price is,” Naimi was quoted by MEES as saying.

“Whether it goes down to $US20, $US40, $US50, $US60, it is irrelevant,” he said.

He said the world “may not” see oil back at $US100 a barrel, formerly Saudi Arabia’s preferred level for prices, again.

Market reaction

Oil fell towards $US60 a barrel on Monday, reversing gains after Saudi Arabia indicated it could increase its output.

Monday’s edition of the Saudi-owned al-Hayat newspaper quoted the kingdom’s oil minister Naimi as saying Saudi Arabia is prepared to increase output and gain market share by meeting the demands of any new customers.

On Sunday he said lower crude prices would help demand by stimulating the economy.

Brent fell 72 cents to $US60.66 by 1415 GMT. It is down more than 46 per cent from the year’s peak in June above $US115 per barrel. U.S. crude was down 84 cents at $US56.29 a barrel.

“We are going down because you have some OPEC ministers who come every day making statements trying to drive the market down, said Olivier Jakob, an oil analyst at Petromatrix Oil in Zug, Switzerland.

“They come every day to convey the message that they are not doing anything to restrict supplies and that they basically want oil prices to move lower to reduce production in the U.S.”

OPEC’s decision not to reduce production at a meeting in November sped up the decline in already falling oil prices. Prospects for a cut in the near future look remote.

While analysts said Brent would likely remain above $US60 a barrel this year, they said further large jumps in price were unlikely.

Analysts said the price drop would have only a gradual impact on the outlook for production.

“Given the lead time in permit approval and rig construction ahead of oil production, a sizeable negative U.S. supply response given the price drop is unlikely to take place until late 2015, which places further downward pressure on oil prices in the first six months of next year,” National Australia Bank said in a note.

It said it expected Brent and U.S. crude to average $US68 and $US64 per barrel respectively in 2015.

Analysts also said they expected relatively low price volatility for the rest of the year as traders begin to wind down their 2014 positions.

Kazakhstan Prepares For $40 Oil, Gary Schilling Says "Oil Going To $20"

Zero Hedge,

22 December, 2014

"People should not be worried," explained Kazakhstan President Nursultan Nazarbayev in a TV address over the weekend, "we have a plan in place if oil prices are $40 per barrel." Kazakhstan, the second largest ex-Soviet oil producer after Russia, explains "there are reserves which could support people, preventing living conditions from worsening." However, if A. Gary Schilling's reality check of $20 oil being possible comes to fruition, as he explains,what matters are marginal costs - the expense of retrieving oil once the holes have been drilled and pipelines laid.That number is more like $10 to $20 a barrel in the Persian Gulf... We wonder who has a plan for that?

The Kazakh President says "don't worry", as Reuters reports...

Kazakhstan, the second largest ex-Soviet oil producer after Russia, has plans in place should global oil prices fall as low as $40 per barrel, President Nursultan Nazarbayev told local TV channels.

 

"Kazakh people should not be worried. We have a plan if oil price are $70, $60, $50, $40 per barrel," he said, according to a transcript published on his website www.akorda.kz.

 

"There are reserves which could support people, preventing living conditions from worsening," he said, without providing any details.

 

Kazakhstan's National Fund, which collects oil revenues, stood at $76.8 billion at the end of November. Separately, the central bank's net gold and foreign exchange reserves stood at $27.9 billion.

 

Nazarbayev has also urged the Kazakh people not to worry about the slide in Russia's rouble currency, which has lost some 45 percent of its value versus the dollar this year.

But A Gary Schilling is less sure... (via Bloomberg View)

When the U.S. Federal Reserve ended its quantitative-easing program in October, it also ended the primary driver of U.S. stocks during the past six years. So long as the central bank kept flooding the markets with money, investors had little reason to worry about a broader economy limping along at 2 percent real growth.

 

Now investors face more volatile markets and securities that no longer move in lock-step. At the same time, investors must cope with slower growth in China, minuscule growth in the euro area and negative growth in Japan.

 

Such widespread sluggish demand -- along with ample supplies of oil and most everything else -- is the reason commodity prices are falling. They have been since early 2011, but many people failed to notice until recently, when crude oil prices nosedived.

 

Normally, less demand and a supply glut would lead the Organization of Petroleum Exporting Countries, beginning with Saudi Arabia, to cut production. As the de facto cartel leader, the Saudis would often reduce output to prevent supply increases from driving down prices.

 

Of course, this also cost the Saudis market share and encouraged cheating by OPEC members. Saudi leaders must grind their teeth over the last decade's unchanged demand for OPEC oil, while all the global growth has been among non-OPEC suppliers, principally in North America.

 

That may explain why, while Americans were enjoying their Thanksgiving turkeys, OPEC surprised the world. Pressed by the Saudis and other rich Persian Gulf producers, it refused to cut output despite a 38 percent drop in the price of Brent crude, the global benchmark, since June. 

 

OPEC, in effect, is challenging other producers to a game of chicken. Sure, the wealthier producers need almost $100 a barrel to finance bloated budgets. But they also have huge cash reserves, which they figure will outlast the cheaters and the U.S. shale-oil producers when prices are low.

 

The Saudis also seized the opportunity to damage their opponents, especially Iran and what they see as Iran-dominated Iraq, in the Syria conflict. They also want to help allies Egypt and Pakistan reduce expensive energy subsidies as prices fall.

 

Then there’s Russia, another Saudi opponent in Syria, with its dependence on oil exports to finance imports and 42 percent of government outlays. With the ruble collapsing, the Russian central bank let the currency float in November after blowing through $75 billion to support it. Then the central bank tried to stop the free fall by raising interest rates by 6.5 percentage points to 17 percent on Dec. 15. 

 

Still, the Russian currency is floundering, along with the economy. Consumer prices in Russia rose 9.1 percent in November from a year earlier. The economy will be in recession next year, the website of the Russian economy ministry acknowledged for a few hours on Dec. 2, before the posting was deleted.

 

Venezuela is also suffering. The government needs $125-a-barrel oil to cover its spending, of which 65 percent depends on oil exports. Its crude production is down a third since 2000. With inflation raging, the bolivar officially sells for 6.29 a dollar, but for 180 on the black market.

 

In Nigeria, where oil and natural gas account for 80 percent of government revenue and almost all its exports, the naira has fallen 11 percent versus the greenback so far this year.

 

How low can oil prices go? In the current price war, the global market price needed to support government budgets isn't really the main issue. Nor are the total costs for exploration, drilling and transportation. 

 

What matters are marginal costs -- the expense of retrieving oil once the holes have been drilled and pipelines laid. That number is more like $10 to $20 a barrel in the Persian Gulf, and about the same for U.S. shale-oil producers. The estimated $50 to $69 a barrel break-even point for most new U.S. shale-oil production is less relevant. 

 

Developing countries that depend on commodity exports for hard currencies to service foreign debt will produce and export even at prices below their marginal cost. Until some major producer chickens out and cuts production, oil prices should remain low. They could decline a lot more than the 50 percent drop so far.

Oil prices

This article reflects relative truth as it seems to ignore the reality of Peak Oil. The price war is only one aspect, as I see it.

Oil prices keep plummeting as OPEC starts a price war with the US

Vox,

28 November, 2014

Oil prices have been dropping sharply over the past three months — a huge energy story with major repercussions for dozens of countries, from the United States to Russia to Iran.

But on Friday, prices went into serious free-fall. The reason? OPEC — a cartel of oil producers that includes Saudi Arabia, Iran, Iraq, and Venezuela — had a big meeting in Vienna on November 27. Before the gathering, there was speculation that OPEC countries might cut back on their own oil production in order to prop up prices. But in the end, the cartel couldn't agree on how to respond and did nothing.

Oil prices promptly nosedived, with the price of Brent crude now hovering around $70 per barrel:

(NASDAQ)

This marks a big shift in global oil politics. Essentially, OPEC is now engaged in a price war with oil producers in the United States. The cartel will let prices keep falling in the hopes that many of the newest drilling projects in the US will prove unprofitable and shut down.

This is a risky stand-off for OPEC, as many of its member countries require high oil prices to balance their budgets. Iran, for one, is facing a real pinch. It's also a sign that OPEC's influence over global oil markets may be waning.

Below is a basic overview of how we got to this point — and what this oil price war means for the rest of the world.

Why oil prices have been plummeting in 2014

To understand this story, we have to go back to the mid-2000s. Oil prices were rising sharply because global demand was surging — especially in China — and there wasn't enough oil production to keep up. That led to large price spikes, and oil hovered around $100 per barrel between 2011 and 2014.

But as oil prices increased, many energy companies suddenly found it profitable to start extracting oil from difficult-to-drill places. In the United States, companies began using techniques like fracking and horizontal drilling to extract oil from shale formations in North Dakota and Texas.

That led to a boom in "tight oil" production, as the US has added about 4 million new barrels of crude oil per day to the global market since 2008. (Global production is about 75 million barrels per day, so this is a significant number.)

(Energy Information Administration)

Up until very recently, however, that US oil boom — along with increases in Canada and Russia — had a fairly minimal effect on global prices. That's because, at the exact same time, geopolitical conflicts were flaring up in key oil regions. There was a civil war in Libya. Iraq was a mess. The US and Europe slapped oil sanctions on Iran and pinched that country's exports. Those conflicts took more than 3 million barrels per day off the market.

Things changed again around September 2014. Many of those disruptions started easing. Libya's oil industry began pumping out lots of crude again. And even more significantly, oil demand in Asia and Europe has been weakening — particularly in places like China, Japan, and Germany.

The combination of weaker demand and rising supply caused oil prices to start dropping from their June peak of $115 per barrel down to around $80 per barrel by mid-November. Oil is still much pricier than it was a decade ago (when it was still around $40 per barrel). But it's dropping for now.

OPEC's surprising response: Let prices keep falling

(Alexander Klein/AFP/Getty Images)

That brings us to OPEC, which still produces 40 percent of the world's oil. For decades, this cartel has often tried to influence the price of oil by coordinating either to cut back or boost production.

At its big meeting in Vienna on November 27, there was a lot of heated debate among OPEC members about how best to respond to this current drop in oil prices. Some countries, like Venezuela and Iran, wanted the cartel (mainly Saudi Arabia) to cut back on production in order to prop up the price of oil. The reason is that these countries need high prices in order to "break even" on their budgets and pay for all the government spending they've racked up:

OPEC "break-even" prices in 2012. (Matthew Hulbert/European Energy Review)

On the other side of the debate was Saudi Arabia, the world's largest oil producer, which was opposed to cutting production and willing to let prices keep dropping.

For one, officials in Saudi Arabia remember what happened in the 1980s, when prices fell and the country tried to cut back on production to prop them up. The result was that prices keptdeclining anyway and Saudi Arabia simply lost market share. What's more, the Saudis have signalled that they can live with lower prices around $80 per barrel in the short term. (The government has built up massive foreign-exchange reserves to finance deficits.)

In the end, OPEC couldn't quite agree on a response and ended up keeping production unchanged. "We will produce 30 million barrels a day for the next 6 months, and we will watch to see how the market behaves," said OPEC Secretary-General Abdalla El-Badri after the meeting.

For all intents and purposes, OPEC is now engaged in a "price war" with the United States. What that means is that it's very cheap to pump oil out of places like Saudi Arabia and Kuwait. But it's more expensive to extract oil from shale formations in places like Texas and North Dakota. So as the price of oil keeps falling, some US producers may become unprofitable and go out of business. The result? Oil prices will stabilize and OPEC maintains its market share.

The catch is that no one quite knows how low prices need to go to curb the US shale boom. According to the International Energy Agency, about 4 percent of US shale projects need a price higher than $80 per barrel to stay afloat. But many projects in North Dakota's Bakken formation are profitable so long as prices are above $42 per barrel. We're about to find out how this all shakes out — and which numbers are correct.

What's especially interesting here is that Saudi Arabia and OPEC appear to be ceding their long-standing role in modulating the global supply of oil. Instead, they'll leave that up to the markets.

How falling oil prices could affect Russia, Iran, and the US

Vladimir Putin has his work cut out for him. (Maxim Shipenkov/AFP/Getty Images)

A plunge in oil prices could have significant economic consequences around the world. A few examples:

Russia: Russia's situation is getting most of the attention these days. The country was already suffering from weak growth — on pace to expand just 0.4 percent in 2014. Part of that was due to the ongoing Ukrainian crisis and Western sanctions.

RUSSIA HAD BEEN PLANNING FOR $100-PER-BARREL OIL IN ITS 2015 BUDGET

But the plunge in global oil prices is likely to put even further strain on the nation's economy. Oil revenues account for roughly 45 percent of Russia's budget, and the government's spending plans for 2015 had assumed that prices would stay in the $100-per-barrel range. If oil continues to stay well below that, Russia will either have to draw down its $74 billion foreign-exchange reserves or cut back on planned spending.

Iran: Iran's economy had recently started to rebound after years of recession. The International Monetary Fund had been projecting that the country was on track to grow 1.5 percent this year and 2.3 percent next year. But that was all before oil prices started to drop — a potentially precarious situation for the country.

One big problem for Iran is that it also needs oil prices well north of $100 per barrel to balance its budget, especially since Western sanctions have made it much harder to export crude. If oil prices keep falling, the Iranian government may need to make up revenues elsewhere — say, by paring back domestic fuel subsidies (always an unpopular move, at least in the short term).

The United States: In the US, meanwhile, a fall in crude prices would have more varied impacts. For many people, it will offer a nice economic boost: cheaper oil means lower gasoline prices, giving households more money to spend on other things. On the other hand, oil-producing states like Texas and North Dakota are likely to see a drop in revenues and economic activity. (For more, see: "Which states get hurt most by falling oil prices?")

The price drop could also spur people to start using more oil. Case in point: In recent years, high gasoline prices have spurred many Americans to buy smaller, more efficient cars. But if gasoline prices fall, bigger cars and SUVs could make a comeback. (Overall US fuel economy will still keep rising over time — because the federal government has imposed new standards on cars and light trucks through 2025. But this might now happen more slowly.)

In the Financial Times, energy expert Michael Levi has a piece on how the US (and other countries) could take advantage of low oil prices to make needed energy-policy reforms — such as ending wasteful fossil-fuel subsidies or putting in place new efficiency measures — in order to prepare for the day when prices inevitably rise again. But that's hardly guaranteed to happen: Many policymakers might just decide low oil prices are here to stay and use it as an excuse to cut back on efficiency measures or energy alternatives.

Further reading

-- The price of oil is falling right now, but it's not hard to imagine scenarios in which it starts rising again. As energy economist James Hamilton points out, instability in Libya, Iraq, or Nigeria could do it. And, of course, if Canadian and US oil producers pull back sharply in response to lower prices, those prices will eventually stabilize and rebound.

-- This piece by Reuters' Alex Lawler, Amena Bakr, and Dmitry Zhdannikov has some excellent reporting on the internal debates within OPEC during Thursday's meeting.

-- How the oil and gas boom is changing America.

-- 9 questions about the Keystone XL pipeline you were too embarrassed to ask