OPEC Deal Could Trigger Drilling Boom In U.S. Shale
Submitted by Nick Cunningham via OilPrice.com,
If anyone is cheering the news of an OPEC deal it is U. S. shale producers. The OPEC agreement sent oil prices shooting up this week, with WTI and Brent quickly surging above $50 per barrel.
Saudi Arabia has agreed to swallow the pain by lowering its oil production, reducing the global surplus to the benefit of everyone else. But it also managed to convince some of its intractable peers to chip in some production cuts, including Iraq, which had previously resisted any cuts. OPEC was even able to bring Russia on board for 300,000 barrels per day in reductions, even though Russia is not an OPEC member.
The result is significant by any measure. OPEC is planning to cut 1.2 million barrels per day beginning in January and non-OPEC producers could add another 600,000 barrels per day in reductions. The global supply-demand balance will likely flip from surplus to deficit when the deal is implemented, and Goldman Sachs sees oil prices rising to $60 per barrel in the first half of next year.
Surely there were champagne corks being popped in Texas as OPEC announced its decision. The share prices of more than 50 U. S. oil and gas companies shot up by more than 10 percent on Wednesday. The S&P 500 Energy Sector Index gained 5 percent, rising to its highest level since mid-2015.
This post was published at Zero Hedge on Dec 2, 2016.