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13 February

By Ahmed Mamdouh

Category: FX Graph

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Why US shale production could ruin OPEC-Russia plan?

The escalating U.S. shale production could ruin plans by OPEC and Russia to restore stability in oil prices, the latest EIA reports indicated.

OPEC and Russia are still working on product cut plans to level supply and demand this year, but with the U.S. becoming head to head with large producers the cartel’s strategy could prove its failure.

Last week’s EIA report showed that U.S. crude output surpassed 10 million barrels per day for the first time since 1970, where the monthly data showed a whooping rise by 850,000 barrels per day between August and November.  

In January, the average production will probably total 10.25 million barrels, which would put the U.S. head to head with Saudi Arabia, while making it much closer from Russia’s output of nearly 10.95 million barrels a day.

Without doubt, the U.S. shale production has taken advantage of the rise in crude oil prices to a 37-month high of $66.64 a barrel in January. This could eventually ends with a grim scenario for OPEC, which is a soaring U.S. production decoupled with an ease in oil demand, due to the high prices.

“With the surplus having shrunk so dramatically, the success of the output agreement might be close to hand,” yet the “main message” remains that “fast-rising production in non-OPEC countries, led by the U.S., is likely to grow more than demand,” said the International Energy Agency on Tuesday.

The IEA predicted a growth in global oil demand by 100,000 barrels a day to 1.4 million a day in 2018, while OPEC projected a rise to 1.59 million barrels per day.

Ahmed Mamdouh

Ahmed Mamdouh is the head of the English Fundamental Analysis at D1stp.com, with 9 years of experience in the financial markets. Mamdouh holds a Master’s Degree in Economics from The American University in Cairo and a Bachelor Degree in Economics from The Faculty of Economics and Political Science, Cairo University.