After months of debate, members of OPEC in week three output to reach an agreement

After months of debate, members of OPEC in week three output to reach an agreement, agreed that since the beginning of January 2017 will cut 1 million 200 thousand barrels a day to 32 million 500 thousand barrels, but the production rate is equivalent to only about 1% of the global output.

Specifically, OPEC’s largest oil producer Saudi Arabia agreed to spare, greatly reduce the production cut of 486 thousand barrels a day, down 10 million 60 thousand barrels, Iraq’s second largest oil producing countries also agreed to cut 210 thousand barrels a day, down 4 million 351 thousand barrels. In addition, non OPEC members Russia unexpectedly also agreed to cut output by 300 thousand barrels a day, contrary to market expectations. However, Iran is not in the production list, but was allowed to increase to 3 million 900 thousand barrels per day.

Analysis of the industry, while the OPEC move intended to stimulate the sluggish rebound in international oil prices, but the production is very difficult to achieve the expected effect of dumbledore. On the one hand, the OPEC production rate is low, only about 1% of global output and economic growth, lack of motivation, the increased demand for crude oil is slow, difficult to change the basic situation of oil city oversupply fundamentally; on the other hand, the U.S. shale oil will regain the opportunity for development, in addition to the United States President elect Trump that will relax outside of American oil limit, because OPEC cut the initiative to make the market share and painstakingly create a rising price trend, will also boost the shale oil production increased rapidly.

As you can see, after the international oil prices slightly warmer has made the shale oil drilling number showing growth. As of December 2nd week, the U.S. oil drilling activity to increase the number of 3 to 477, the highest since January. In the past 25 weeks, the number of active drilling oil has accumulated an increase of 155, once the oil price continued to pick up, will make the shale oil yield increase rapidly, thus bullish effect largely offset the OPEC cut. Moreover, the US shale oil production cost has been reduced by nearly half compared with 2014 levels, more survivable if more U.S. shale oil into the market, which will undoubtedly bring new relationship between oil supply and demand shocks.