On 30th November 2017, the Organization of Petroleum Exporting Countries (OPEC) and its non-OPEC friends decided to extend the output cuts till the end of 2018. OPEC and its allies started withholding supplies since January 2017 and currently plan to continue doing so throughout 2018. Brent Crude oil price has rallied from USD 44 per barrel in the month of June 2017 to USD 65 per barrel in the month of December 2017. The cut in production led to the decrease in supply of oil from OPEC and other supporting countries which has helped it rally in the last six months.
The rise in price of crude oil in the international market would allow US shale oil companies to increase production and thereby contribute to the rise in supply. The rising U.S. output threatens to undermine efforts led by the OPEC and a group of non-OPEC producers, most importantly Russia, to support prices by withholding supplies.
The U.S. oil production surged in September 2017, jumping by a massive 290,000 bpd from a month earlier, hitting 9.48 mb/d. The U.S. shale industry shifted into expansion after prices jumped above USD 50 per barrel.
The upside for Brent Crude oil price is therefore expected to remain limited as the decision to cut production by OPEC would make way for higher supply of US shale oil in the international market and decrease prices accordingly.
Brent crude oil increased to 65 USD/BBL in the month of December 2017 from 44 USD/BBL in the month of June 2017. Brent crude oil averaged 41.78 USD/BBL from 1970 until 2016, reaching an all-time high of 145.61 USD/BBL in July of 2008 and a record low of 8.75 USD/BBL in July of 1986.
Nymex Crude oil increased to 58 USD/BBL in the month of December 2017 from 42 USD/BBL in the month of June 2017. Nymex Crude oil averaged 40.08 USD/BBL from 1946 until 2016, reaching an all-time high of 145.31 USD/BBL in July of 2008 and a record low of 1.17 USD/BBL in February of 1946.