The possibility of OPEC deciding to extend the deadline of its November 30 oil output cut agreement is growing, according to one former senior U.S. energy official. Former Assistant Secretary of Energy Chuck McConnell told Sputnik, however, that this decision will hardly affect prices in any significant way.
McConnell’s comments come on the heels of reports that Kuwait has called for an extension of the deal – the first OPEC member to acknowledge the fact that international oil markets are not regaining their balance as fast as initially expected by the group, thanks largely to growing U.S. production.
Although there are expectations that prices will soar if OPEC announces an extension, McConnell believes this will not be the case, because the market is already relatively stabilized. Besides, he said, “I think the OPEC situation and the deal is not a governing factor for how the market will go forward. It is a part of it, but it’s certainly not a driving force.”
The driving force now is technology, McConnell believes, and this new dynamic that tech’s dominance has created will likely lead to more frequent and abrupt price fluctuations in the future. Thanks to technology, U.S. shale will continue to gain prominence and increasingly become a major force with which to reckon concerning oil industry decisions. Related: Will Nigeria Be Forced To Join The OPEC Production Cut?
Growing shale oil output is considered the main headwind for prices at the moment, offsetting – along with higher production in the exempted nations – the effect of the supply cuts. Earlier this year, U.S. total crude output topped 9 million barrels daily, thanks largely to production builds in the shale patch. This will continue, with the EIA forecasting that in April shale output will rise by 109,000 bpd, bringing the total yield of the seven most prolific basins in the United States to 4.96 million bpd.
Meanwhile, OPEC seems to be struggling with the failure of its much-hyped deal to bring oil prices to at least $60 per barrel. The cartel is now monitoring Nigeria’s production and may be preparing to press it into joining the cut. Nigeria is pumping 1.8 million bpd right now, which is equal to the amount agreed to be taken off the market by OPEC and 11 other producers at the end of last year.
By Irina Slav for Oilprice.com
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