for Low Oil Prices
The recent increase in floating storage is an ominous sign that the OPEC cuts may not balance the market, and it also poses a threat to the ambitious drilling campaigns by U.S. shale companies that are still recovering from the price crash to below $30 in early 2016.
There are some signs that the U.S. shale industry is bumping up against its productivity limits, which could lead to lower-than-expected output gains or rising drilling costs.
Although some hold onto bullish sentiment, traders are skewed toward a downside or rangebound bias in the near term—OPEC has lost credibility, the large inventory overhang persists, shale’s resurgence and a rising rig count continue, and the spat over Qatar didn’t affect the market. None of these factors should change anytime soon.
In the aftermath of the 2014 price fall, producer countries have had to reevaluate policy and economic strategy while contending with a persistent glut that may dampen prices for some time, further undermine their budgets, and possibly cause domestic strife.
Venezuela’s current state of affairs is a prime example of why it’s important for economies of both producers and consumers to reduce dependence on oil. The meltdown in Caracas is a precarious situation for the U.S., given that Venezuela is its number three crude oil supplier.
Despite constant chatter of rebalancing, oil prices have been weakening, and OPEC has itself to blame for causing market uncertainty and instability.
Algeria's president has called for the country to combat the “hegemony of fuel” in light of recent economic devastation.
Despite continued rapid growth in U.S. shale, the global oil market could see price spikes and increased volatility at the beginning of next decade.
Nothing will change materially in the oil market until there’s a significant stock draw, a development that appears doubtful, which could ultimately force OPEC to change strategy once again.
After two years of seeing spending contract, the oil industry is poised to boost capex in 2017, but some warn that may not be enough to keep a shortfall from occurring in the future.