Hamm: No Doha deal, no OPEC, no problem

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OPEC’s failure to reach a deal in Doha was momentous. For the first time in recent history, the cartel’s attempt to manipulate world oil markets didn’t work.

The Doha debacle provides clear evidence that OPEC’s artificial pricing tactics have been replaced by the true market fundamentals of supply and demand, as illustrated by the market response to Kuwait’s oil production coming offline after the meeting.

At the same time, U.S. crude oil exports are now reaching virtually every corner of the world – from Germany to Italy to Israel to Japan. Less than six months after America lifted its 40-year-old export ban, free markets are working, OPEC is irrelevant, and the global oil market is stabilizing.

In fact, our research anticipates the market will rebalance in the second half of 2016 and oil prices will be at $60. This was not a widely held view when we first shared it back in January. Today, numerous analysts have arrived at the very same conclusion.

The oil market has passed an inflection point, and prices are up 50 percent from previous lows. With demand growth and supply contraction, analysts at Raymond James; Tudor, Pickering, Holt; Guggenheim; and more agree oil will be at $60 or higher by year-end.

As oil demand increases 1.3 million barrels per day, the oversupply will be gone within the year. China and India are driving demand up further – through both consumption and strategic stockpile building. Meanwhile, in addition to production decreases in Mexico, Brazil, Venezuela and Iraq, U.S. production has slipped below 9 million barrels per day for three consecutive weeks. With the U.S. rig count at its lowest level since 1999, the industry simply cannot replace supply overnight. Using the Bakken as an example, in order to get back to 2014 production levels within the next 18 months, the play would have to ramp up to about 140 rigs. Today, there are only about 30 rigs running in the play. Indeed, it will take an enormous amount of investment to get back to peak production anytime soon.

In the meantime, premium light sweet U.S. crude oil is in high demand worldwide. As OPEC is tapping out, American oil is making a comeback. U.S. crude oil exports are bringing stability to world markets and ensuring our friends and allies are never again held hostage by Saudi Arabia, Russia, Iran or other dictatorial regimes.

Harold Hamm is chairman and CEO of Continental Resources.