OPEC cuts extension or no, US shale boom will continue
Production cuts inadvertently led to an acceleration of US shale production that will continue regardless of what OPEC does next
Late last year, OPEC and top non-OPEC producers agreed to cut production to prop up falling oil prices. The cuts succeeded in lifting prices, but also encouraged US shale producers to pump out more. The extra supply has weighed on prices, and has left OPEC with little they can do to push prices back up, reports Investor’s Business Daily.
If OPEC extends the deal, US producers would likely continue to ramp up production on higher prices, but shale leaders have improved efficiency to the point that they can pump profitably at lower prices.
Some warn, however, that US shale’s success could lead to higher costs from increased activity and less money spent on drilling.
“I worry that we will get too complacent with the increase in shale production at the expense of conventional and other higher-cost drilling and will see a future price shock down the road,” Phil Flynn of Price Futures Group was quoted by Investor’s Business Daily as saying.