This comes in the wake of an oil-price rise (as measured by the Brent crude benchmark) of almost 25% so far in 2019. Oil producers had slashed production in what Goldman Sachs analysts referred to as a “shock and awe strategy”. Opec and the other big producer, Russia, have cut output from 31.6 million barrels a day (mbpd) in December to 30.8 mbpd in January.
Meanwhile, oil-producing Venezuela has been in meltdown, and Iran’s production is limited by US sanctions. Dwindling supply had bolstered bullish sentiment. But only minutes after Trump’s tweet, the oil price dropped by 2.5%. The tweet’s impact illustrates the oil bull’s “shaky foundations”, says Sheppard.
US shale output is in full flood. In the past year, US oil production has risen by two mbpd to a record 12 mbpd in the past year. It is expected to surpass 24 mbpd over the next six years, says Reuters. Last year, American oil producers experienced pipeline bottlenecks, but those should ease by the end of 2019.
ExxonMobil and Chevron, the two largest US oil groups, have sharply lifted their expectations of output. For example, Exxon has revised its projection of oil and gas production in the Permian region of Texas and New Mexico from 600,000 barrels per day to one million a day in 2024.
The oil market is in a ”tug of war” between Opec and shale, as Darrell Fletcher of Huntington Bank told Reuters. And the US team is gaining strength.