Oil-cut deal threatened by exempt nations and by shale

Subject

OPEC-non-OPEC deal compliance

Significance

Strong compliance with production cut allocations among OPEC members is being balanced by increases from exempt members Libya and Nigeria. There has also been a rise in Iranian output, allowed under the terms of the agreement. Higher prices have added impetus to the revival of US shale output.

Impacts

• Shale drilling costs have fallen, and productivity has risen, making US shale expansion and contraction balance at 50 dollars per barrel.
• US shale will take market share from high-cost output such as oil sands rather than OPEC, assisting the positive US economic outlook.
• The shift in the cost structure of oil output will boost investment in non-US shale, while non-US, non-OPEC oil drilling will struggle.