Oil prices have ticked up as Opec, the oil exporters’ cartel, has launched a renewed attempt to cut output and reduce a glut. Opec states have been pumping at record levels to flood the market and put US shale producers out of business. But lower prices have caused a painful squeeze in the oil-addicted economies of the Gulf.
However, Opec countries are notorious for failing to stick to agreements. “If… it doesn’t fall apart as everybody cheats, prices could climb back to $60 next year,” David Fyfe of oil trading group Gunvor told The Daily Telegraph. “But that is a very big if.” If they don’t manage it, prices could slump below $40 again.
The main problem is that the US shale industry is now so efficient that it can “crank output within months at once-unthinkable break-even cost”, says The Daily Telegraph’s Ambrose Evans-Pritchard. What’s more, Donald Trump has vowed to ease drilling regulations, and open more land for exploration. Shale appears to have capped the oil-price recovery, so if Opec doesn’t defy the cynics and bolster prices with cuts now, its cosseted members could be in for years of austerity.