Why Some Believe Oil Prices Will Not Climb Higher Soon

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The North American oil boom might have slowed down, but it remains an important feature of the global petroleum production landscape. With newly developed technologies enabling productive extraction of reserves that would formerly have been unprofitable at any realistic price, even today’s lessened pace of activity cannot be overlooked in the course of any comprehensive analysis. While Saudi Arabia wielded the power of OPEC well in fighting back against this relatively recent development, it harmed itself and other members in the process. Amid the great amount of focus on how last year’s very low oil prices were hurting producers in the United States and Canada, it was relatively rare to see discussion of what they were doing to OPEC members and other countries even more dependent on the export of oil.

Despite having succeeded in at least one respect, Saudi Arabia seems to be unlikely to want to up production levels so significantly again in the near future. This has led some to suggest that the doubling of oil’s price over the last year could be continued for some time, particularly with fairly healthy demand growth being in evidence. While that is an understandable take on the situation, many experts are counseling that stability will be much more likely the result.

In this post, for example, one authority on the market details a number of reasons why soaring oil prices are not likely to return anytime soon. While plenty of North American extraction operations were shuttered as oil prices plummeted last year, they were nearly as quick to start coming back online when levels rose thereafter. Instead of doing permanent damage to the North American oil production industry, what Saudi Arabia and others instead achieved was therefore merely a temporary bit of respite.

Clamping down excessively on production from this point forward might result in some short-term heightening of oil prices, but that movement would likely be short lived. As the oil boom in North America once again got underway for real, global supplies would probably climb high enough to offset just about any restrictions Saudi Arabia and others would willingly abide by. As a result, many believe that the present range of trading for the market is likely to start to feel comfortable and familiar before long.