Although fundamentally nothing really changed…
An abrupt change in mining…
UAE’s Oil Minister Suhail al-Mazrouei said in a TV interview he did not expect any “significant growth” in shale oil output anytime soon, despite higher oil prices resulting from last week’s OPEC agreement to cut production by 1.2 million bpd.
The official added that he expected oil price increases from now on to happen on a “more rational basis,” without elaborating.
Mazrouei’s words beg the question of who the minister is trying to convince – OPEC or the market, since weekly rig count reports from Baker Hughes reveal that shale oil operators have been adding drilling rigs consistently over the past few months.
The latest report, for the week to November 25, said that the total oil rig count reached 477, marking the 25th weekly increase in 27 weeks. The figure was lower than the same week in 2015, but still indicated that the shale patch is recovering, and that it started recovering long before OPEC made its move to lift oil prices.
Although the OPEC agreement succeeded in lifting prices, skepticism is still abundant, as it becomes clear that the 1.2-million-bpd reduction is unlikely to affect current production rates on a global level.
Two large OPEC producers – Libya and Nigeria – have been exempted from the production cut and are intent on building their output as fast as they can to make up for revenues lost due to internal conflicts.
Russia, which agreed to slash 300,000 bpd from its overall production, said it would do it “gradually” and from November 2016 levels, which were, on average, 11.2 million bpd. Also, the cut will coincide with the normal 150,000-bpd seasonal reduction in output in the spring of 2017.
Iran has been allowed to raise its output to 3.797 bpd as well.
Finally, there are another 300,000 bpd that OPEC hoped to convince non-OPEC countries to cut, and some say they are willing, but it is still unclear exactly who will cut and how much. Another meeting between the cartel and non-OPEC members is scheduled for November 10 in Vienna.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.