U.S. shale boom neutralizes output cuts
By Nigar Abbasova
For leading U.S. shale oil producers, $50 is the time to return to the market.
Less than a year ago American shale firms were saying they needed oil above $60 a barrel to produce more; but now with the prices rising after an oil cut deal the shale producers increase output neutralizing gains coming from output reductions.
Oil prices were steady on February 7 as the effect of production cuts by OPEC and other producers balanced with the ample in U.S. shale output.
Benchmark Brent crude futures were 15 cents down and stood at $55.57 a barrel, while U.S. WTI crude was some 15 cents lower at $52.86, Reuters reported. The price of Azeri Light crude oil decreased to $57.20, recording a fall of 88 cents.
Price support was secured after the Organization of the Petroleum Exporting Countries and other major exporters agreed to cut output by almost 1.8 million barrels per day (bpd) in the first half of 2017. But, while major OPEC producers and Russia have together cut at least 1.1 million bpd so far, rising the U.S. output threaten to undermine these efforts.
The U.S. drilling activity rose last week, adding some 17 additional oil rigs and bringing the total number up to 583, a record-high level since October 2015, according to Baker Hughes.
Besides, signs of slowing demand growth also threaten the prices. Reuters calculations based on official data showed that China's 2016 oil demand grew at the slowest pace in at least three years, while the data became the latest indication that demand from the world's largest energy consumer has reduced.
Oil demand growth levels in the country eased to 2.5 percent in 2016, down from 3.1 percent in 2015 and 3.8 percent in 2014.China's consumption growth is forecasted to average 0.3 mbd in both 2017 and 2018, according to the U.S. Energy Information Administration (EIA).
However, market watchers are generally optimistic about the historic deal of energy market players, saying that unlike with previous production cut deals, this time market participants will stay committed to their reduction pledges and production quotas.
Investors are also waiting for production and inventory data, which is scheduled to be released on February 13. An OPEC oversight committee reviews the progress.
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Nigar Abbasova is AzerNews’ staff journalist, follow her on Twitter: @nigyar_abbasova
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