2nd USA oil wave will bankrupt OPEC (SIAP)

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U.S. crude oil prices have plunged by 11 percent over the last two days to a low of $50 a barrel before settling at $52. The mainstream-media blames the fall in prices on the turmoil in China and Greece, but the real driver is the outbreak of discounting by U.S. oil-rig operators.

The resulting fall in the average U.S. “break-even” cost necessary to sustain domestic oil production is now around $32 per barrel. America’s new hyper-competitive cost structure has launched a second wave of an oil boom that threatens to bankrupt OPEC.

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But to OPEC’s shock, U.S. oil production, rather than falling from 8.6 million barrels a day (bpd), actually rose by April to 9.7 million bpd. OPEC’s exports of Middle East “light sweet crude” to U.S. refineries on the Gulf Coast decreased by 45%,

IHS CERA business analysts attribute the continued U.S. production momentum to the cost of oil production dropping by 32 percent in the U.S. as drilling and service vendors have slashed prices to stay busy.

The U.S. “fully burdened exploration and production “break-even” cost is now $51 per barrel, and falling fast. Furthermore, with hundreds of American oil companies having already paid the exploration lease acquisition costs to accumulate tens of thousands of drilling sites, the production-only break-even cost for positive cash-flow is about $29 a barrel. After tacking on a 9 percent profit, U.S. domestic oil companies are now incentivized to produce domestic oil any time the price is above $32 a barrel.

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