"Despite talk of capital discipline and increased focus on returns rather than growth, US producers regrouped quickly when oil prices stabilized and began to rise", the IEA said.
In theory, this set of rules is supposed to trigger an oil rally, which is something that was planned by Russian Federation and the OPEC when they were signing and then extending the so-called OPEC+ agreement created to cap their oil production. On the other hand, lower inventories and higher prices triggered another shale oil boom in the USA.
China's oil imports are poised to exceed 10 million barrels per day and top the old import record, set by the US, in 2022, IEA Executive Director Fatih Birol said on Monday. (See What Record Oil Production In The Permian Basin Looks Like).
Major powers, including the European Union and China, have warned that such tariffs could lead to retaliatory action and trigger a global trade war, which could grind to a halt economic growth and, by extension, oil consumption.
OPEC's emphasis is on the short run, with its strategy of cutting output as part of the Vienna Group and talking to shale producers.
Oil dropped for the first time in four sessions on a reported expansion in us crude inventories and the risk of an intensifying global trade war sparked by President Donald Trump. Those potential shortfalls could result in market volatility that is quite different from what OPEC and non-OPEC collaborators have recently sought to remedy, he said. Exiting the current agreement, which cuts output by 1.8 Mbd, could create a sharp price drop. The price crash of 2014 forced shale producers to reshape themselves into fitter, leaner and faster players that can thrive with a $50 price regime. The most hard thing is to figure out why exactly crude oil prices reach a certain level at any given point, especially these days.
It's now clear that shale barons are fine with remaining free riders as Opec seeks to instil market discipline. If anyone can pressure companies to cut back output, it would be shareholders, many of whom are frustrated with a strategy focused on growth.
Here's the flip side of the catch-22 situation. While the US Energy Information Administration sees worldwide supplies accelerating this year and the next, with estimates for demand growth shrinking, Saudi Aramco Chief Executive Officer Amin Nasser said he isn't losing any sleep over peak oil demand.
Refinery utilization sunk to 87.8% of capacity the week ending February 23, the lowest level since October.
USA companies are unlikely to respond to OPEC's wishes to cut or slow output to increase prices.
True, few analysts realistically expect oil prices to return to the erstwhile $100-plus levels in the near future. This will allow Asian refiners to fill up 40 percent of additional spot demand with USA shale, said Sushant Gupta, the firm's research director.