Energy Aspects, describing the surplus as the biggest since...

Energy Aspects, describing the surplus as the biggest since 2008-09 which is driving down the oil price, but as the price falls it is likely that oil producers will cut production, and while that is always the case whenever there is an oversupply of any commodity, the oil cuts this time could come quickly thanks to the US shale-oil revolution. Unlike earlier periods of oil glut, when Middle East and Russian production proved hard to brake because governments in those regions needed the cash from oil, this time the “swing producer” able to turn production off relatively easily is the U.S. Tim Cutt, the chief executive of BHP Billiton Petroleum, touched on the new factor in world oil in a paper delivered in New York last week when he referred to the “manufacturing” nature of oil and gas in shale and other unconventional petroleum deposits. “The repetitive, manufacturing nature of shale is ideally suited to our productivity agenda,” Cutt told delegates to the Barclays Energy-Power conference. What he means by manufacturing is that shale oil production from hundreds of wells can be more easily controlled than conventional oil reservoirs which tend to boom in their early years and then taper off. In contrast, shale oil starts slowly and actually starts to accelerate later. Potentially, that means the latest fall in the oil price could be shortlived with profit-focussed US production being turned off much more quickly than Middle East production, potentially creating a prolonged period of oil-price stability, even if at a lower price than enjoyed in previous booms.