The executive director of the International Energy Agency today said that “explosive growth” in U.S. oil production from wells in shale geologies is likely to extend beyond 2018.
As you might just imagine, an oil market that is struggling to believe that current levels of production cuts from OPEC are enough to balance supply and demand didn’t react well to the “explosive growth” characterization. U.S. benchmark West Texas Intermediate fell 1.58% today to $62.90 a barrel. International benchmark Brent dropped 1.41% to $66.55 a barrel.
The next official read on U.S oil inventories comes on Wednesday. A Bloomberg survey of analysts projects that the report from the U.S. Energy Information Agency will show that inventories climbed by 3 million barrels last week.
Stronger than expected production growth from U.S. oil shale producers would complicate OPEC efforts to move the price of crude back to $70 from an earlier target of $60 a barrel through production cuts. Governments in OPEC countries and Russia are already coping with the stress on their budgets caused by lower oil prices and lower revenues. While Saudi Arabia seems ready to push for further production cuts in order to raise prices, other producers such as Venezuela are pressing for no new cuts and have even dared to mention the idea of raising production targets.
