The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, are down an average of more than 15% this year. Predictably, the Organization of Petroleum Exporting Countries (OPEC) looms large in the equation for oil ETFs.
While OPEC is cutting back to alleviate price pressures, U.S. fracking companies could jump to capitalize on the windfall as crude oil prices jump back above $50 per barrel – according to some estimates, shale oil producers can get by with oil at just over $50 per barrel due to advancements in technology and drilling techniques that have helped cut down costs.
“OPEC is working on establishing a legal relationship with its partners in the crude oil production cut agreement. This would mean a larger oil cartel controlling possibly more than half of global oil supplies: OPEC currently controls 40 percent,” reports OilPrice.com.
OPEC is looking to reassert its dominance over global oil markets after realizing its recent production cuts did not have the desired impact because North American shale producers kept pumping, weighing on oil prices in the process.
Thanks to the shale boom, the U.S. is now a major oil exporter, which could threaten oil prices. In fact, China has become a major buyer of U.S. crude.