OPEC sees no respite from shale’s onslaught before the second half of the next decade. Until then, the cartel will stick with the one weapon it still has to prevent another oil price collapse: austerity.
Although the group’s historic output limits have fueled a 42 percent price rally since late June, OPEC Secretary-General Mohammad Barkindo on Tuesday signaled the producers’ determination to stay the course through the end of 2018. The bogeyman haunting the Saudis, Russians and other major suppliers: U.S. shale, which shows no signs of backing off until at least 2025.
Even as American drillers embrace the new religion of profits-over-production, OPEC’s latest long-term forecast focused on the ability of shale explorers to thrive regardless of prices, thanks to advances in guiding drillbits and fracking. The U.S. rig fleet may be shrinking, but production isn’t. It’s risen 8.9 percent since 2016.
“The Saudis are finally recognizing they can’t kill the shale guys,” said Bernard Weinstein, associate director of the Maguire Energy Institute at Southern Methodist University. “It’s a brave, new world in the oil market.”