Ali al-Omair, Kuwait’s oil minister, pointed out that prices can fall further, with a natural floor of about $76 to $77 per barrel, near the average production costs in Russia and the U.S.
Saudis are taking a more mid-term view on the oil market, pressuring oil prices now to curb new investment and further increases in supply from places like U.S. shale or ultra-deepwater, Reuters reports. The kingdom is ready to accept oil prices below $90 per barrel and even down to $80 for as long as one to two years.
The energy sector has been pummeled by the quick drop in oil prices, notably companies engaged in oil and gas exploration and shale production. The once high-flying Market Vectors Unconventional Oil & Gas ETF (NYSEArca: FRAK) has decreased 21.8% over the past three months, while the First Trust ISE-Revere Natural Gas Index Fund (NYSEArca: FCG) plummeted 33.8% and the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEArca: XOP) plunged 25.9%.
U.S. oil shale producers require oil prices of about $80 per barrel to operate at a profit, whereas Middle East and North Africa producers require up to $25 per barrel, according to the International Energy Agency. [Fracking ETF Frustrated by Tumbling Oil Prices]
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