US shale production continues to be a concern for OPEC members

Brent Crude oil prices have seen some large fluctuations since the beginning of 2018, breaching $70/bbl in January, to then drop back down to $62/bbl. Geopolitical tension between the US and North Korea, OPEC production caps, and increased US shale production, are all major factors to influence and shape the current price of oil.

In a recent report, OPEC (the Organisation of Petroleum Exporting Countries) raised concerns over the impact of US shale production on global supplies. OPEC – along with Russia and other non members – have been attempting to reduce the global overhang in the market which caused Brent Crude oil prices to drop incredibly in 2016 and then only waver around $45/bbl between then and the end of 2017. As a result of recent caps to oil production in some of the worlds’ major oil exporting countries, Brent Crude prices have inclined. As such, countries not contained within the ‘OPEC deal’ have been able to take advantage of a higher cost of oil. This generally doesn’t sit well with those countries capping oil production, who are not benefitting from the increased costs.

- Source: Reuters

- Source: Reuters

The higher oil prices are said to have influenced a flood of shale oil. Now that the global oversupply could be returning, OPEC members may struggle to get out of their current deal. Said Arabian oil minister has already expressed in Feb 2018 that it was too soon to discuss an exit strategy from the current deal to cap oil production.

One of the only factors preventing oil prices form plummeting is that Venezuela – an OPEC member – has reported large decreases of oil production and export due to the current economic crisis gripping the country. With one of OPEC’s largest countries declining oil production (currently at the lowest in decades), OPEC are generally in line with agreed caps to oil production. A good compliance rate tends to lend to a strengthen of oil prices.




Sources: Reuters, Bloomberg, Energy Live News.