Oil: Can US shale put a lid on prices? - NBF

Krishen Rangasamy, Research Analyst at NBF, suggests that the possibility of oil prices climbing to US$80/barrel or beyond over the next few months cannot be ruled out considering momentum trades in the aftermath of upcoming U.S. sanctions on Iran and excess demand in world oil markets.

Key Quotes

“But such elevated price levels will also entice producers to increase output. Take U.S. shale oil for example, a sector that is profitable at prices above US$50/barrel.”

“U.S. shale oil production has soared to a record 5.5 million barrels per day and now accounts for more than half of America’s oil output. Could shale oil production grow fast enough to wipe out the world’s current excess demand and hence put a lid on prices? Recall that in 2014, the last time there was such a large spread between the price of WTI oil and the shale breakeven, it took just a few quarters for the world’s oil market to shift from a situation of excess demand to excess supply.”