Wednesday, February 8, 2017
OPEC-non-OPEC deal compliance
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.
- 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.