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Production Cuts Lousy Panacea for Broken Oil Markets

Jeffrey Stafford, CFA
Dave Meats, CFA

As many expected, OPEC announced Nov. 30 that it will extend its crude-oil production cuts through the end of 2018. The impact of these cuts will fall short of what the cartel and its partners are hoping for, however.

Several months of stagnating shale growth, driven by a sharp increase in drilled-but-uncompleted wells and the fallout from Hurricane Harvey, have lulled oil markets into a false sense of security. The inevitable resumption of growth in the United States, coupled with expansion in Libya and Nigeria, will probably nudge crude stockpiles higher again in 2018, whether other OPEC members comply with fully agreed production targets or not.

Jeffrey Stafford, CFA does not own shares in any of the securities mentioned above.
Dave Meats, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.