Pummeled by the plunge in oil prices, the OPEC oil cartel agreed last year to cut production to drain the glut. It extended the agreement this year, and prices responded, jumping from a low in the mid-$40s per barrel to above $60 in recent weeks.
Reflecting the petrostates’ uneasy relationship with upstart shale producers in North America, this has helped the US as much, or more, than the cartel’s own members. OPEC’s latest World Oil Outlook report highlights this with a big upgrade to its forecast for North American shale oil production.
How big? This big:
The recovery of American shale production, following a deep downturn during years of low prices, will account for almost all of a 9% forecast increase in non-OPEC production over the next five years. (The fossil fuel-friendly Trump administration will do its part to support production, too.) OPEC supply, meanwhile, is expected to be flat over the next several years.
“OPEC must keep in mind that high prices for too long will unlock incremental shale,” warned Barclays analysts in a recent research note. Although the US is by far the world’s largest shale driller, currently pumping nearly 5 million barrels per day, OPEC expects Argentina and Russia to get in on the shale-oil game in the coming years.