OPEC is targeting $80/barrel for oil, but will it be able to get there if it’s not estimating the proper amount of non-cartel production? In The Wall Street Journal, Sarah McFarlane and Stephanie Yang report:
While cuts from the Organization of the Petroleum Exporting Countries have helped eliminate oversupply of crude oil, the cartel said in its monthly market report that non-OPEC producers such as the U.S. are contributing to rising global supply.
”We still think that the cartel is underestimating non-OPEC supply growth,” said Capital Economics analysts, noting that higher prices will incentivize U.S. producers to ramp up activity and OPEC members to exceed quotas.
Another damping factor was the EIA’s upward revision to its U.S. 2019 production forecast to 11.44 million barrels a day, from its previous figure of 11.27 million barrels. U.S. oil production averaged 9.3 million barrels a day in 2017.
“The merciless growth will continue as long as oil prices remain steady, supported by political tensions in the Middle East,” said Tamas Varga, analyst at brokerage PVM.
Geopolitical risk has lifted prices to multiyear highs this week, as investors focused on news reports of potential action by Western countries in Syria, along with reports that Saudi Arabia intercepted a missile over Riyadh on Wednesday, causing concern of instability in the region. Around two thirds of the world’s oil reserves are in the Middle East.
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