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US Oil vs OPEC Production


Earlier today 14 OPEC member nations and 10 non-OPEC nations agreed to a nine-month extension to their existing production cap agreement struck in November of last year. This would keep the existing production cap in place through to next March in an effort to reduce a supply gut that had driven West Texas Intermediate (WTI) crude oil prices as low as $26/barrel in early-2016.
According to Bloomberg data, since November, 2016 OPEC production has fallen in excess of 2.2 million barrels per day. However, concerns have persisted that U.S. oil production (in particular shale oil) could offset OPEC’s supply cut. As of April, U.S. oil production has increased by 594 thousand barrels per day over the same period. Thus, the net result between OPEC’s supply reduction and the increase in U.S. production has been a decline of 1.651 million barrels per day as of the latest monthly data. Thus, notwithstanding a continued climb in U.S. output, we continue to see the OPEC+ supply cuts having their desired effect of reducing the global supply glut and helping to stabilize oil prices around the $50/barrel mark.


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