Shale oil resurgence weighs on Opec bid to re-balance market

But Opec and Russian Federation have reaffirmed that they'll persevere with their 1.8mn bpd oil-production cuts until the end of this year to clear the glut. "T$3 he underlying oil market fundamentals in the early part of 2018 look less supportive for prices", the IEA wrote.

However, Fatih Birol, the current Executive Director at the IEA had openly differed, underlining the growing shale oil output is not a good omen for markets.

Ironically, this is all happening at the same time that the Nigerian government has pledged to participate in a global pact lead by Saudi Arabia and Russian Federation to restrict oil supply.

OPEC and its partners made a decision to extend its production cuts till the end of 2018 in Vienna on November 30, as the oil cartel and its allies step up their attempt to end a three-year supply glut that has savaged crude prices and the global energy industry.

The divergence in prices kept US crude's discount to Brent (WTCLc1-LCOc1) near a six-month low after widening to more than $7 in December.

Oil prices traded mixed on Tuesday, as last week's gains bolstered the U.S. crude, while Brent prices declined through lower Asian stocks and a stronger dollar, although markets still remained supported by the supply curb. Saudi Arabia told OPEC that it pumped 9.983 million bpd in January.

In any case the growing USA production threatens to undermine OPEC's efforts.

The Joint Technical Committee, which includes officials from both OPEC nations and allies from outside the group, based its rebalancing scenario on the assumption that Libya and Nigeria keep output at January levels and other participants in the deal maintain compliance with cuts, the people said, asking not to be identified because the discussions were private.

Ayed Al Qahtani, OPEC's head of research, said the excess of oil held in storage has fallen in the past year to stand 74 million barrels above the five-year average. Question marks about the overall demand structure are creeping up once again.

Meanwhile, the restoration of full capacity from the Forties pipeline in the North Sea - closed for several weeks for repairs after a crack was discovered in December - has eased concerns over the supply of Brent crude. It remains to be seen whether these declines will signal a buy to push markets higher or whether they will begin a longer-term downtrend. Back in 2014, United States shale production was growing so fast that it ended up crashing the market.

For the time being at least, good, old friend Fatih Birol seems to be having an upper hand in his ongoing battle with Falih.


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