Oil Prices Caught Between Shale and OPEC Agendas

There are two forces at work in the oil markets today creating a tug of war. On the one hand you have U.S. shale producers on a quest to reach 10 million barrels a day in production amid falling seasonal demand. On the other hand you have the perception that the oil glut that has gripped the world over the last few years is coming to an end because of OPEC restraint and increased demand from improving economies.

These forces are keeping the oil market range bound, with crude oil prices trading between $47 and $54 per barrel.

West Texas Intermediate graph

The reality in my opinion is that while OPEC has stuck to its agreement of 2016 to limit production to 32.5 million barrels a day, oil oversupply continues. It’s true that oversupply is about half of what it was a couple of years ago, according to the Office of Economic Development, but it is still there.

Libya which is not part of the agreement continues to produce more oil than it did a year ago. It recently announced it wants to get back to 1.25 million barrels a day, or about double what it produces today.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza