Production Cuts Lousy Panacea for Broken Oil Markets
Rising U.S. production is likely to stall OPEC efforts to normalize global crude stockpiles.
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 has a position in the following securities mentioned above: SLB. Find out about Morningstar’s editorial policies.