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JEDDAH: The Organization of the Petroleum Exporting Countries’ (OPEC) job to restore the balance of the oil market just got harder as more output is expected to come from shale oil producers in North America with oil prices settling now at around $50.
OPEC is not sure that the market will rebalance this year if more production from shale oil producers can offset the group’s efforts to bring down global inventories, an OPEC source told Arab News.
The source said that there are risks to the deal from supply from other OPEC members such as Libya and Nigeria that are exempted from the production cut targets, due to their security issues and unstable production situation.
OPEC is now trying to conduct more studies on the impact of shale oil in the market and the findings of these studies will be presented to the ministers of the committee that monitors the agreement to cut production in their next meeting, the source, who asked not to be named because he is not authorized to speak to media, added.
The committee known as the Joint Ministerial Monitoring Committee, or JMMC, will probably convene in Vienna next month to review market developments since the last meeting in Russia in July, the source said. Shale crude oil production from seven major US oil plays is expected to reach a record in September. The US Energy Information Administration (EIA) said on Aug. 14 in its monthly drilling productivity report that it expects shale oil production to climb by 117,000 barrels per day (bpd) in September.
The EIA said last week that US production in the week ending Aug. 11 hit 9.5 million bpd, a level not seen since 2015, according to Bloomberg’s estimates. “$50 a barrel is still a pretty critical number and that number is going to be even more critical as we move into next year,” Tortoise Capital Advisors’ Rob Thummel told Bloomberg on Aug. 2.
Some analysts, however, expect shale oil production not to grow by as much as many in the industry believe that the cost of production for shale is also increasing. Standard Chartered’s analyst Steve Brice told Bloomberg TV on Aug. 22 that shale oil will stabilize this year at current levels unless oil prices increased from current levels.