US shale roars back at Opec

london — Opec may get its members to agree to continue to tamp down oil production, but it will be a Pyrrhic victory.

The biggest threat to the 13-member group’s dominance has been US shale.

In November 2014, the Organisation of Petroleum Exporting Countries decided to keep production levels high in the hope it could maintain market share. But that was a difficult task to begin with, and since then, US shale producers have become even more efficient.

By the time Opec reversed course in November 2016, sending oil prices up as much as 10 per cent, shale had already gained ground.

There are areas in the enormous Permian and Eagle Ford shale fields in Texas where producers can break even at prices as low as $34 a barrel, according to Bloomberg Intelligence.

And analysts now say US shale production will grow even faster than expected. Macquarie Group now thinks production will increase 1.4 million barrels a day through December, up from a previous growth estimate of 0.9 million barrels a day. JPMorgan Chase & Co doubled its forecast to an increase of 800,000 barrels a day for the same period.

As Opec and non-Opec producers cut back on production, US shale producers are moving to quickly fill the gap. Their output increase is equal to about half of the Opec cuts and twice that of Russia’s cuts, according to a report out this week by Eugen Weinberg, head of commodity research at Commerzbank. — Bloomberg