conditions by 1. 6 MMb/d and 1. 4 MMb/d,
In spite of this historic role as an oil
market regulator, at the OPEC meeting
in November 2014, the organization retained its quotas of oil production. Moreover, actual production continued to
exceed official quotas. Saudi Arabia declared the strategy of market share defense. Many market observers did not
expect this outcome because the strategy
could have led to the tangible deterioration of economic situations of organization members.
Because of oil price descent and the
disengagement of OPEC, drilling activity
in the US shale oil plays was set to decline
(see Figure 2). Rig counts peaked in October 2014 at 1,309 units and then collapsed to 579 units in June 2015. A sharp
decrease in drilling caused a slump in new
wells put into operation. Shale oil production peaked at 5. 47 MMb/d in March
2015 and then began to decline.
F1: CRUDE OIL PRICES
1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 2017e
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In spite of the US production decrease, new production from Iraq continued to
depress oil prices that plunged to $30/bbl in February 2016. The price meltdown was
amplified by lifting sanctions imposed on Iran that considerably ramped up its exports
since January 2016.