U.S. Shale Crash, Russian Tycoon Says

OPEC Policy Ensures U.S. Shale Crash, Russian Tycoon Says

OPEC Policy Ensures U.S. Shale Crash, Russian Tycoon Says

By Will Kennedy and Jillian Ward | Bloomberg

OPEC policy on crude production will ensure a crash in the U.S. shale industry, a Russian oil tycoon said.

The Organization of Petroleum Exporting Countries kept output targets unchanged at a meeting in Vienna today even after this year’s slump in the oil price caused by surging supply from U.S shale fields.

U.S. Shale Crash, Russian Tycoon Says American producers risk becoming victims of their own success. At today’s prices of just over $70 a barrel, drilling is close to becoming unprofitable for some explorers, Leonid Fedun, vice president and board member at OAO Lukoil (LKOD), said in an interview in London.

“In 2016, when OPEC completes this objective of cleaning up the American marginal market, the oil price will start growing again,” said Fedun, who’s made a fortune of more than $4 billion in the oil business, according to data compiled by Bloomberg. “The shale boom is on a par with the dot-com boom. The strong players will remain, the weak ones will vanish.”

Oil futures in New York plunged as much as 3.8 percent to $70.87 a barrel today, the lowest since August 2010.

At the moment, some U.S. producers are surviving because they managed to hedge the prices they get for their oil at about $90 a barrel, Fedun said. When those arrangements expire, life will become much more difficult, he said.

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