Surging US output a concern: Opec

Crude prices fell as low as $35 per barrel at the start of 2016, but they have been rising since

Oil prices, long battered by a global glut in supply, have been rising recently as the market returns to balance on the back of a landmark deal between producers to throttle output, but surging shale production in the United States could throw a spanner in the works, Opec said yesterday.

Crude prices fell as low as $35 (Dh128.55) per barrel at the start of 2016, but they have been rising since, reaching a three-year high of more than $70 per barrel last month, “on signs that production adjustments by Opec and non-OPEC participating countries are balancing the market,” the Organisation of Petroleum Exporting Countries wrote in its latest monthly market report.

Strong economic data — notably from the US and Germany — as well as geopolitical tensions in the Middle East have also helped support prices, the oil body said. But it cautioned that “surging US production remained a concern”.

Opec countries and other oil-producing countries, such as Russia, agreed at the end of 2016 to cut back production to combat the global glut in oil.

At a meeting in Vienna at the end of November, they agreed to extend that deal until the end of 2018.

But with crude prices on the rise, shale producers, particularly in the US — who are not party to the deal and whose overheads are lower than the oil majors — are ramping up output to cash in on the boom.

And that, in turn, could jeopardise the delicate balance that the market has now reached, Opec said.