OPEC’s extensions to output cuts is unlikely to stop bullish US oil and gas activity, a market expert has claimed.
Regina Mayor, of KPMG, said the nine month extension had seen little impact on US activity, which has been ramping up.
From the shale plays of the Permian to the traditional Appalachian acquisitions, under Donald J. Trump it seems that little can slow the market, Mayor the National Sector Leader of Energy and Natural Resources said.
She added: “The US is still focused on the longer term planning.
“A lot of the plays here can be profitable in a £50 and below market.
“We’re still seeing development and production activity as well as quite a lot of assets changing hands.
“Everyone is still pretty bullish on the prospects and US shale is not falling at all.”
Many analysts say the rise in US activity has flown in the face of cuts by OPEC and its allies, who agreed to curb output for the first six months of 2017.
The move, to take 1.8 million barrels a day of production, has seen compliance by almost all of the participating countries – much to many sceptics’ surprise, Mayor said.
She said: “Generally speaking there was investor disappointment. But I strongly believe there is a Wall Street view of the oil price and there’s an oil company’s view of the price.
“That’s why we saw a short term decline but a regain in the market price.
We are seeing more compliance with the cuts than we thought that we would and I think people are getting more comfortable around a stabilised price in the $50 range.
“Even if they don’t extend the cuts any further, they don’t plan to glut the market by turning everything on right away. That’s important to the market. That March deadline is around a lower demand point for crude oil refined products.”
And with the oil business booming again under Trump’s leadership came another threat to OPEC’s market control – the possibility of selling off the Strategic Petroleum Reserve, one of the world’s largest emergency supply.
Mayor said: “The rhetoric around it was for budgetary reasons. Trump has some ambitious tax cut agendas. And this was a potential way to fund some of those activities.
“The announcement showed deference to capital markets. If they flood the market and force the price of crude down then they won’t raise the money they are hoping for.
“I expect we shall see some sales but they will be strategically managed so that it doesn’t drive down the global price.
“OPEC need to think fundamentally differently about how the manage global supply and cut the member compliance so that they can have a positive impact on the oil price.”
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