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Demand and Supply
Determinant of supply :
-Factor Price
-Surplus
-Price Ceiling

Production and Cost
-Accounting profit

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Concepts related :
Production and costs
- less revenue ( less goods supply at a given price )
-Decrease in no. of worker to make up for the loss of revenue

Demand and supply
-Decrease in price of oil  leads to drop in qty supply of oil

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© Sputnik/ Sergey Eshenko

Following the deep crisis that hit Norway's oil industry amid market depression, Stavanger's authorities and business community have seen their youth leaving in droves as the job market shrivels up, the Danish newspaper Berlingske wrote in a feature article.

Prior to the start of Norway's romance with the oil industry, Stavanger was one of the poorest cities in Europe. Everything changed in 1969, when a routine sea drill struck oil in the North Sea off Stavanger's coast. Wealth started pouring into the city and turned it into Norway's undisputed oil capital. Today one cannot say Stavanger without implying oil. Stavanger reportedly has the highest per capita ownership of Porsche cars in the world.

For over 40 years, Stavanger could not think of anything other than oil. Engineers kept flocking to the city from both Norway and the rest of the world. They went West in true settler style in the pursuit of wealth - and ultimately found it. The shortage of competent labor was so great that the wages were steadily pushed up until finally reaching over a million kroner a year (120 000 dollars).

The term "oil children" applies to the generation born in the 1970s and 1980s, as the colossal wealth hit Norway. Those children never lacked anything, least of all money. Remarkably, the Norwegian expression "to get a job in the oil" implies a guaranteed job that would set one for life.

However, the recent plunge in the city's unemployment statistics has shattered the oil utopia. At least 13,000 of the 100,000 inhabitants of Stavanger Municipality are long-term unemployed. The downturn in the Norwegian oil industry goes step by step with the price per barrel of oil. Norwegians have always known that their oil would run out in the long run. What they had never envisaged is that the rainy days would come as suddenly as they did.

In the summer of 2014, oil prices were above 115 dollars per barrel, but in December 2015 they fell under 40 dollars. Trade organization Norwegian Petroleum and Gas estimated that 50,000 jobs will disappear in the oil industry by 2018. By January this year, Norway had already lost a total of 27,000 jobs.

© AFP 2016/ PIERRE-HENRY DESHAYES

The authorities and businesses are most concerned about young professionals.

"They are men in their thirties, who have never experienced a single rainy day. They have earned over a million kroner a year while complaining they earn too little and work too hard. They have had no concerns at all. They bought houses for several million kroner while still in their twenties," Svein Olav Simonsen, regional director at the Norwegian Organization for Employers NHO said.

Stavanger, also dubbed, "Norway's oil capital," is the country's fourth largest city, located on the North Sea coast in the southwestern part of the country. The oil industry still remains Norway's main and most important industry, employing some 250,000 Norwegians.

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Norwegian Organization for Employers NHO

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Norway's Klondike: From Oil Capital to Unemployment Capital

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© Sputnik/ Sergey Eshenko Following the deep crisis that hit Norway's oil industry amid market depression, Stavanger's authorities and business community have seen their youth leaving in droves as the job market shrivels up, the Danish newspaper Berlingske wrote in a feature article.

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Concepts related:
Demand and supply
Determinants of supply : factor price ( decrease cost of production - reduce workers'wages )

Production and costs
( Reduce total variable costs - generate more revenue )

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(Adds third union, details on affected fields, background)

OSLO, June 27 About 755 Norwegian oil workers could go on strike from Saturday if employers and unions fail to agree a new wage deal before a Friday deadline that would limit output from Western Europe's top producer, trade unions said on Monday.

A final round of mandatory talks will be hosted by a state mediator on June 30 and July 1 in an effort to avoid a conflict that could start the following day..

Employers have argued that a plunge in oil prices since 2014 must be accompanied by cost cuts and flexible work practices to help make the industry stay competitive. Unions say members should receive pay increases matching those in other industries.

The Industri Energi union said it would take out 524 members if the talks break down, affecting the Statoil-operated Oseberg, Gullfaks and Kvitebjoern fields.

The SAFE union said it would take out 156 workers on ExxonMobil's Balder, Jotun and Ringhorne fields.

In addition, 75 workers on Engie's Gjoea field would also go on strike, the smaller union Lederne said.

A protracted strike may ultimately result in more than 7,400 workers going on strike, data from the state mediator's office showed.

"We do of course wish for the mediation to lead to a deal, so that a conflict is avoided," the Safe union said in a statement.

The three labour unions will negotiate on behalf of the oil workers, while Norwegian Oil and Gas will represent oil and gas firms.

In 2012, a 16-day strike among some of Norway's oil workers cut the country's output of crude by about 13 percent and its natural gas production by about 4 percent. (Reporting by Stine Jacobsen, editing by Terje Solsvik and Louise Heavens)

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UPDATE 1-Norway trade unions say 755 oil workers could go on strike

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(Adds third union, details on affected fields, background) OSLO, June 27 About 755 Norwegian oil workers could go on strike from Saturday if employers and unions fail to agree a new wage deal before a Friday deadline that would limit output from Western Europe's top producer, trade unions said on Monday.

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*Concepts related :
-Demand and supply

>Qty demanded – decrease in real income  ( currency exchange rates - stronger US dollar/weaker British pound – willing and able to buy less oil - Qty demand of oil in UK decrease)

> Determinant of supply
( UK - Factor price - decrease in cost of production of oil in UK as oil is sold in US dollar)
( US - Expectation of supplier - expect oil price to recover in 2017 - decrease in oil production in US)

>Determinant of demand (  no. of buyer decreases due to uncertainty )

> Price of related goods ( for gasoline ) (complement – gasoline is produced through oil refinery - drop in oil prices – qty supply of oil decrease , decrease in supply of gasoline )

> Market disequilibrium
( surplus - which leads to drop in oil price and decrease in oil production in US)

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News Corp is a network of leading companies in the worlds of diversified media, news, education, and information services.

Period of uncertainty likely to keep oil prices below $50 in the short term

Oil prices arrested declines in late afternoon trading in Asia on Monday, a move analysts say is likely short-lived as effects from the U.K. leaving the European Union will continue to weigh on crude.

"This could be some bullish investors and traders doing some bargain-hunting but rising uncertainty over the U.K.'s economic growth and the country's trade relationship with the EU will keep oil prices below $50 in the short term," said...

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Oil Prices Largely Steady in Wake of 'Brexit'

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News Corp is a network of leading companies in the worlds of diversified media, news, education, and information services. Period of uncertainty likely to keep oil prices below $50 in the short term Oil prices arrested declines in late afternoon trading in Asia on Monday, a move analysts say is likely short-lived as effects from the U.K.

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Concepts related:
- supply
- shortage
-price elasticity
Since the production of the oil decrease, it causes an increase to the price of the oil, with the decrease in price, they lack the access to capital market hence they must close down the number of rigs from four to three ( causing decrease in supply )

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Until the capital markets open up and allow U.S. oil companies to spend outside of their cash flow, production will not increase and crude prices will continue to rise, Tapstone Energy CEO Tom Ward said Thursday.

"There's no increase in the capital spending, the debt side of the business is closed, and so until we have something fairly dramatic happen like maybe a doubling of the rig count, I don't think we can grow production in the U.S.," he said in an interview with CNBC's " Power Lunch."

Therefore, "I wouldn't be surprised at all if we saw above $60 or even $70 [a barrel] by the end of the year," added Ward, the co-founder of Chesapeake Energy.

His comments come on the heels of American oil billionaire Harold Hamm's prediction that oil will likely hit $69 to $72 per barrel by year's end.

U.S. crude futures fell Thursday, settling 67 cents lower, or 1.3 percent, at $50.56 a barrel, after hitting a new 2016 high at $51.67. The climb back up from the mid-$20 range lows has some worrying U.S. oil producers will put more rigs to work, which could send the price of oil down again.

Tapstone Energy currently has three rigs online, down from four, and Ward said there are no plans to add more rigs. It's the same across the industry, he said, because of the lack of access to capital markets.

"I think prices will have to move up even higher than we're talking about for there to be a big change in the rig count," said Ward. "We can't change the decline of the oil production in the United States without more capital, and right now that's just not available."

That said, as soon as funds open up, Ward plans to start spending.

"We will spend whatever you give us. As long as there is money to be had through the capital markets, then we'll use that to grow production, because that's what we're paid for."

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Oil prices will rise, not US production: Tom Ward

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Until the capital markets open up and allow U.S. oil companies to spend outside of their cash flow, production will not increase and crude prices will continue to rise, Tapstone Energy CEO Tom Ward said Thursday.

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Concepts related:
-demand and supply -->   demand increased by 2 percent in March, compared to the same month last year, to 19.6 million barrels
-surplus --> Many Middle East oil producers, including top exporter Saudi Arabia but also Iraq, Iran and the United Arab Emirates have ramped up their supplies to Asia in an aggressive fight for market share.

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By Henning Gloystein

SINGAPORE (Reuters) - Oil prices fell early on Wednesday as production from the major Middle East exporters was expected to remain high or even increase just as concerns over the state of China's economy weighed on its fuel demand outlook.

International benchmark Brent crude oil futures were trading at $49.59 per barrel at 0041 GMT, down 30 cents, or 0.6 percent, from their last settlement.

U.S. West Texas Intermediate crude futures were down 23 cents, or 0.47 percent, at $48.87 a barrel.

Traders said that the dips were a result of the prospect of rising output from Middle East members of the Organization of the Petroleum Exporting Countries (OPEC), which meets this week in Vienna to discuss its market policy, which most analysts say will continue to focus on defending market share instead of propping up prices by controlling output.

"Many OPEC members ... have plans to grow, so cutting supply now may interfere with those objectives," Morgan Stanley said in a note to clients.

Many Middle East oil producers, including top exporter Saudi Arabia but also Iraq, Iran and the United Arab Emirates have ramped up their supplies to Asia in an aggressive fight for market share.

But on the demand side, Morgan Stanley said that it was worried about China's economic health.

"Our economists worry that April data showed China may be slowing ... The oil demand data from China should reinforce those concerns," the U.S. bank said.

British bank Barclays said that there were also signs of "investor fatigue" in oil markets following months of heavy inflows.

A Reuters poll this week showed that most oil investors expect only limited potential for further price gains this year as production continues to outpace demand.

Despite this, oil prices have risen over 20 percent, or almost $10 dollar per barrel, since early April, largely because of supply disruptions across the globe, and especially in Africa and Canada, and as overall demand remains strong despite China's slowing economy.

In the United States, the world's top oil consumer, demand increased by 2 percent in March, compared to the same month last year, to 19.6 million barrels per day (bpd), the highest seasonal level since 2008, according to Barclays.

(Reporting by Henning Gloystein; Editing by Joseph Radford)

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Oil prices fall on rising Middle East output, China demand concerns

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Read more about Oil prices fall on rising Middle East output, China demand concerns on Business Standard. SINGAPORE (Reuters) - Oil prices fell early on Wednesday as production from the major Middle East exporters was expected to remain high or even increase just as concerns over the state of China's economy weighed on its fuel demand outlook.

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Concepts related:
-  Demand and supply
> qty supplied - more oil sold at higher price ( oil sold at $47.58 per barrel, $1.93 higher than the previous week)

> change in market equilibrium - crude oil prices raised (Saudi Arabia has been raising its own crude oil prices, to the highest level since 2014)

> opportunity cost ( Iran will continue to pump oil, even if it has to cut prices)

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Iran has been selling more oil at higher prices in recent weeks. The country sold light crude oil at $47.58 per barrel in the week ended on June 10, a $1.93 higher from the previous week, according to the Teheran Times.

Iran's price hike comes as the country expands output to reach its pre-sanction market share; and as Saudi Arabia has been raising its own crude oil prices.

It was only a few months ago that Saudi Arabia and Iran were rushing to sign contracts with Asian customers, undercutting each other, pushing prices lower, towards the $20s.

In the first week of June, Saudi Arabia raised prices for Arab light crude in Asia for the second month in a row, the first back-to-back increase since May 2015, to the highest level since September 2014.

Saudi Arabia's and Iran's price hikes come at a time when unforeseen events, like wildfires in Canada and disruptions in Nigeria, have reduced the global oil glut; and a few days after OPEC members failed to reach an agreement to an oil output freeze.

Will these price hikes last? It doesn't seem so.

The impact of unforeseen events on the oil markets seems to be subsiding. Besides, America's production is coming back, as evidenced by the rise in US rig count- Baker Hughes reported two consecutive weeks of increases in the rig count.

Most notably, Iran doesn't seem willing to go along with Saudi Arabia on future price hikes. In a recent interview reported in Tehran Times, Iran's oil minister Bijan Zanganeh stated that Asia was a primary market, but that Iran "should look more in Europe and Africa," suggesting that it won't be matching Saudi Kingdom's price hike. Iran has yet to reach its pre-sanction market share. Besides, it needs the oil revenues to upgrade its refinery capacity. This means that Iran will continue to pump oil, even if it has to cut prices.

Saudi Arabia's crude oil is similar to that of Iran's, and for several months, the long time enemies have been engaged in an epic battle to damage each other's economy, which has been taking oil market for a rough ride, as previously discussed here.

Source: Finance.yahoo.com

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Following Saudi Arabia, Iran Hikes Crude Oil Prices For Now

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Iran has been selling more oil at higher prices in recent weeks. The country sold light crude oil at $47.58 per barrel in the week ended on June 10, a $1.93 higher from the previous week, according to the Teheran Times. Iran's price hike comes as the country expands output to [...]

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Concepts related:
- Production
> production affected due to unexpected outages

- Demand and supply
> qty supply - decrease in supply as production declined due to unexpected supply distributions

> qty demand
- affected by decline in production
- qty decrease, price increased as demand increase

> change in market equilibrium - both demand and supply were affected by the reduced reduction, supply losses are leading markets to rebalance.

> shortage and surplus - long-term surpluses can create near-term shortages

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The global oil market has flipped to a deficit sooner than Goldman Sachs Group Inc. had expected.

A decline in production driven by unexpected supply disruptions, as well as sustained demand, have resulted in a "sudden halt" to the output surplus, Goldman analysts Damien Courvalin and Jeffrey Currie wrote in a report dated May 15. Other banks such as Morgan Stanley, Barclays Plc and Bank of America Corp. also noted that supply losses are leading markets to rebalance.

The unexpected outages caused by everything from wildfires in Canada to pipeline attacks in Nigeria will keep production below demand through the second half of this year, according to Goldman. Still, the return of some output and higher-than-expected volumes from the U.S., the North Sea, Iraq and Iran mean the shortfall will be 400,000 barrels a day rather than the 900,000 previously predicted, it said. A return to surplus production is seen in early 2017.

"The physical rebalancing of the oil market has finally started," Goldman said. The bank raised its U.S. crude price forecast for the second half of 2016 to $50 a barrel from $45 estimated in March. It cut its forecast for the first quarter of 2017 to $45 from $55, but sees oil at $60 by the end of that year. The bank expects global demand to grow by 1.4 million barrels a day in 2016, versus 1.2 million predicted previously.

'Cyclically Bullish'

The changes to forecasts reflect "our long-held view that expectation for long-term surpluses can create near-term shortages and leaves us cyclically bullish but long-term bearish."

West Texas Intermediate crude, the U.S. benchmark, rose 2.1 percent to $47.18 a barrel on the New York Mercantile Exchange at 7:37 a.m. local time. Front-month futures are up 80 percent from a 12-year low earlier this year. Brent, the marker for more than half the world's oil, was at $48.80 a barrel in London.

While supply disruptions over the past two weeks have reduced production by 1.5 million to 2 million barrels a day, prices are up only $2 a barrel, reflecting ample inventories, according to Goldman. With stockpiles at historically elevated levels in several countries, the current outages have had little actual impact on the availability of crude, it said, adding that "high product stocks would even allow for lower refinery runs if necessary."

Inventory Shifts

The pace of withdrawals from inventories is what will drive prices as uncertainty around future supply-demand balances remains "significant," according to the bank. "The price recovery will remain anchored by near-term inventory shifts, with the oil market less forward-looking than over the past two years," the analysts wrote.

While stockpiles in the U.S., the world's biggest crude consumer, shrank in the week ended May 6 for the first time in more than a month, stored supplies remained close to the highest since 1929, data from the Energy Information Administration show.

The oil market "looks set on a course for rebalancing much faster than previously expected," making the risk of a sharp price drop unlikely, Barclays analysts Miswin Mahesh and Kevin Norrish said in a report. Francisco Blanch, head of commodities research at Bank of America Merrill Lynch, reiterated his forecast for U.S. prices to reach $54 in the fourth quarter as supply retreats. Adam Longson, an analyst at Morgan Stanley, said that while temporary disruptions have moved markets "into balance for now," the "inventory buffer" is blunting any rally.

Market Drivers

Goldman's expectation for a return to a production surplus in 2017 reflects the view that low-cost suppliers such as Saudi Arabia, Kuwait, the United Arab Emirates and Russia will continue to drive output growth, the bank said.

"While the physical barrel rebalancing has started, the structural imbalance in the capital markets remains large," the analysts wrote. "The industry still has further to adjust and our updated forecast maintains the same 2016-2017 price level that we previously believed was required to finally correct both the barrel and capital imbalances."

Before it's here, it's on the Bloomberg Terminal. LEARN MORE

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Goldman Surprised by Sudden Oil-Market Turn as Glut Vanishes

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The global oil market has flipped to a deficit sooner than Goldman Sachs Group Inc. had expected. A decline in production driven by unexpected supply disruptions, as well as sustained demand, have resulted in a "sudden halt" to the output surplus, Goldman analysts Damien Courvalin and Jeffrey Currie wrote in a report dated May 15.

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Concepts related:
> Surplus
-- There is a surplus in the number of oil rigs in the United States. It was stated that there is a high number of unused oil rigs so much so that the oil industry would be able to  restart several hundred times before the costs start to rise.

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IN THE wilds of western Texas, a flicker of life has returned to the fracking, or hydraulic-fracturing, industry. In the past four weeks nine idled oil rigs have been put back to work in the Permian basin, the richest of America's shale-oil provinces. That is only a tiny fraction of the 429 that had been taken out of service over the previous 18 months as the oil price plunged, at one point hitting a low of under $30 a barrel. But it is the first four-week rise in a year.

In recent weeks the oil price has recovered to around $50 a barrel (see chart). Scott Sheffield, boss of Pioneer Natural Resources, one of the top producers in the Permian, points out that futures prices for delivery in a year's time have also risen above $50 a barrel, which allows him to lock in a decent profit on any new wells he can bring into production by then. Hence he may soon raise the number of rigs his firm has drilling in the Permian from 12 to at least 17 and perhaps as many as 22. "The Permian has bottomed out," he says.

In addition to drilling more wells, some firms are planning to frack mothballed ones-wells that have been drilled but not yet pumped full of sand, water and chemicals to open up fissures allowing oil trapped in shale to flow out. Others are simply pushing their pumps harder, which uses more energy but may be worth it at $50 a barrel.

All this supports the claim that fracking has brought a new dynamic to global oil markets: the ability to flex output up and down more quickly than conventional oil drilling, rather like factories responding to changes in demand. Conventional oilfields take years to develop and then produce oil for decades, leaving oil output relatively unresponsive to short-term price movements. Shale wells, in contrast, take just a few weeks to drill and frack, and have a lifespan of only a few years, so production quickly falls if drilling abates.

Shale-oil supply did indeed prove more elastic than the conventional sort when prices were falling, albeit with a delay. When the rout started in 2014, it took the shale-oil industry months to accept the fact that it was more than a temporary decline. But the number of rigs, and hence production, eventually plummeted, helping to bring the market closer to balance.

Shale-oil seems to be moderating prices on the way back up, too. On June 10th, the day Baker Hughes, an American oil-services provider, reported that for a second week in a row there had been a tiny uptick in drilling in America, West Texas Intermediate (WTI), the American crude-oil benchmark, fell back below $50 a barrel. If shale-oil is indeed acting like the valve on a pressure cooker, regulating the market when it gets too hot or cold, the result should be a less volatile oil price.

But the valve may not function perfectly. One question is the sustainability of the recent price rise. Shale-oil executives remember with chagrin the false rally of early 2015, which led them to maintain output longer than they should have. They note that the oil industry is still producing almost 1m barrels a day (b/d) more than the world is consuming. The International Energy Agency, an industry forecaster, said on June 14th that demand will not match supply until next year. "You don't want to add rigs and then bring them back down again," says Mr Sheffield.

Another concern is how quickly supply can really be ramped up. Rigs have been idled for so long that it may take months of maintenance before they can be brought back into service. Workers may also have found new jobs, making it hard to entice them back. Financial strains are considerable, too: about 70 shale-related firms have gone bust in America since the start of last year, and those on financial life support will focus more on paying down debt than on investing in more production.

If production does start to race ahead, the recent decline in shale-oil firms' costs may reverse. Per Magnus Nysveen of Rystad Energy, a consultancy, says producers have become so much more efficient and drilling contractors so much cheaper that American shale firms can, on average, make a healthy 10% return with WTI at $39 a barrel, down from $82 in 2013. But he reckons there is little room left to squeeze out additional costs. What's more, shale-oil firms' service contracts are of short duration, so if rigs or workers become scarce, prices can rise very quickly. For every $1 increase in the oil price, Mr Nysveen expects a $1 increase in costs.

Mr Sheffield disputes this. He says the number of unused rigs is so high that the industry will be able to restart several hundred before costs start to rise. But he agrees that $50 is not enough to boost output significantly. R.T. Dukes of Wood Mackenzie, a consultancy, says that if the price stays at $50 until the end of the year, investment in shale production will remain "flat to down". If it is between $50-60, investment will be "flat to up". Only above $60 a barrel will it be "up across the board", he says. "We don't expect supply to turn on a dime, but we do think declines will slow down."

Even if America's oil industry does revive, it is still only about 1m b/d below its peak last June, meaning higher production could be dwarfed by cutbacks elsewhere in the 95m b/d global oil industry. Wood Mackenzie calculates that oil and gas producers have promised to cut at least $1 trillion from their planned investment in exploration and production in 2015-20, reducing output by the equivalent of a whopping 7 billion barrels in 2016-20 compared with projections before the slump.

Industry bulls, including top executives among the biggest producers, believe that in focusing on smaller shale firms as potential swing producers, the markets are missing a longer-term supply drought caused by the evaporation of investment in conventional wells. This, they add, may be exacerbated by a recent upswing in demand in America, China and elsewhere, fuelled by lower prices. This could cause a sudden surge in prices, to as much as $80 a barrel.

Yet not everyone has discounted the possibility that oil prices will plummet again. A lot depends on whether Saudi Arabia has the capacity to raise production substantially, as its deputy crown prince, Muhammad bin Salman, has indicated it will. Some argue that ahead of the planned initial public offering of Saudi Aramco, the state oil company, it would make sense for the kingdom to pump more oil to increase the company's value. What is more, with copious reserves still in the ground, the Saudis may see logic in stepping up production in order to extract as much value as they can before technology and climate change dampen the world's appetite for oil. A price of $50 a barrel may well be sustainable, but the battle of the sheikhs and the shalemen is not over yet.

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IN THE wilds of western Texas, a flicker of life has returned to the fracking, or hydraulic-fracturing, industry. In the past four weeks nine idled oil rigs have been put back to work in the Permian basin, the richest of America's shale-oil provinces.

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*Concepts related:
> Loss minimisation
Although there are falling prices of the oil in the oil industry, the producers still continue to pump and produce the oil. This is because if they were to stop producing, they would incur high costs of stopping and restarting again. Also, if they shut down, they would have no total revenue and the loss incurred would be all their fixed cost as compared to when they continue producing, it would be able  cover all the variable cost and some fixed cost. Hence, to minimise cost, they continue to produce and pump for oil.

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It's called the law of supply and demand.

When a commodity costs more to produce than the current market price, producers usually stop producing it. But when it comes to U.S. crude, a global crash in prices hasn't been matched by deep cuts in production.

The biggest impact so far has been felt on investment in new wells, as U.S. producers big and small have slashed capital spending and sidelined drilling rigs. As of this month, about 350 rigs were drilling for oil in the U.S. - about a quarter of the peak in October 2014.

Jeyhun Abdulla | Bloomberg | Getty Images

That pullback has brought economic pain to much of a U.S. oil industry that saw big gains in jobs and wages during a production surge that began in 2012. But while investment in new production has dried up, oil continues to flow from the wells that have already been drilled.

Overall output has fallen by about 6 percent since peaking a year ago, but many producers have opted to keep on pumping, even as prices remain stuck at around $40 a barrel - less than half the peak of mid-2014.

In the past, when rising surpluses pushed crude prices lower, major producers like Saudi Arabia cut back output to tighten supplies, boosting prices. But as American and Canadian producers have expanded production, Middle East producers continued to pump, hoping the crash in prices would push higher-cost North American producers out of business.

With North American production holding up, that strategy backfired. Many oil-producing nations have pushed for an output freeze, but after meeting this weekend in the Qatari capital of Doha, 18 exporting nations, including non-OPEC member Russia, were unable to agree to a deal to stabilize output at January levels.

Most U.S. producers seem equally uninterested in cutting production. Oil industry analysts say there are several reasons the decision to stop pumping when prices fall is not as straightforward as it may seem.

For starters, the cost of producing a barrel of oil varies widely from one well to another, based on the initial cost of finding and developing the oilfield, along with the costs of borrowing, operations and maintenance.

Some of the recent expansion of U.S. crude production, for example, has come from so-called "stripper" wells - once abandoned sites that are seeing new life thanks to advanced production techniques. Many of these are profitable even at current market prices.

But at $40 a barrel, roughly 2 million barrels a day of current global crude output costs more to pull out of the ground than it's worth, according to an analysis of global oil production by Wood Mackenzie, a commodities market research firm.

Why do those producers keep pumping? For some producers, the high cost of stopping and restarting has spurred them to keep producing and put the surplus in storage, in the hope that prices will rise again.

As a result, the world's storage facilities are awash in oil. In the U.S., stocks of crude and petroleum products are up 20 percent since prices peaked and are well above five-year highs.

At the same time that production continues to grow, global consumption is softening - in part due to an economic slowdown in China and throughout much of the developing world.

Until the outlook becomes clearer, a few producers have decided to stop pumping. The biggest cuts have come from high-cost oil sands and onshore fields in Canada, older U.S. onshore projects and aging U.K. North Sea fields, according to Wood Mackenzie.

Worldwide, production continues to rise. Aside from increased Saudi production, OPEC's second biggest producer, Iraq, has been boosting output and Iranian exports are coming back on line now that sanctions against that country have ended.

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Oil is falling, but US keeps pumping-here's why

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It's called the law of supply and demand. When a commodity costs more to produce than the current market price, producers usually stop producing it. But when it comes to U.S. crude, a global crash in prices hasn't been matched by deep cuts in production.