Despite the rise in US shale oil production, the expected extension of the OPEC oil extraction caps will provide a moderate support to global oil prices in the near-term, with boom or bust scenarios almost ruled out as the global energy market balances gradually.
Kristian Rouz – OPEC member-states and other oil-producing nations are meeting on May 25 to discuss, among other things, the extension and deepening of oil extraction caps in order to support crude prices and ease the supply-side glut issue.
An oversupply of oil has been affecting the global oil producers since the second half of 2014, when US shale production skyrocketed, proving disruptive to the existing structure of global oil trading.
Even though, according to the Saudi Energy Minister Khalid Al-Falih, all oil producers have agreed to extend oil caps by nine months, also possibly decreasing the current levels of extraction, global oil prices are not expected to post a significant rally in the near-term. The main reason is that the OPEC and non-OPEC oil cuts might be effectively offset by an increase in US shale oil production.
Last year, the US lifted a 40-year oil export embargo, and this February, the US shipped record-high volumes of crude overseas. While OPEC oil cuts have resulted in a decrease in the global market share occupied by members of the energy cartel (most notably Saudi Arabia), US oil started to fill this niche.