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OPEC plans take market share from US shale



In one of the least hot meetings of recent years, OPEC and its allies have postponed their production cuts to March 2020, suggesting that the oil market is still over-supplied and demand growth at least seems to be weaker by 2019. [19659002] OPEC's mission to reduce excess inventory would, if successful, lead to higher oil prices, which cartel members need to balance their budgets, most of which rely excessively on oil exports.

Even higher oil Prices are unintentionally contributing to US shale production continuing to grow, offsetting most of the barrels OPEC is holding back from the market.

It looks like the cartel is now seeking higher oil prices and later thinking about regaining market share.

OPEC and its Russia-led non-OPEC partners are currently focusing on reducing inventories and increasing prices in the reduction of production, even though this means, according to Bloomberg News, that OPEC's market share and market share of OPEC For the first time since 1

991, OPEC's global oil production has fallen below 30 percent.

According to JP Morgan, OPEC's "free passage" to US shale will not last long. In the medium term, the cartel and its de facto leader and largest producer Saudi Arabia will regain US shale market share, said Christyan Malek, head of EMEA oil and gas research, CNBC this week.

Related: Putin: Oil price volatility impairs the Russian economy

The Saudis and OPEC want to "support oil while they are effectively pregnant with all of this economic growth and capital they need deliver. But under these circumstances, we tell the cops: do not get used to it, "Malek told CNBC's Squawk Box Europe.

The cartel is now "two feet in value camp" to boost oil prices, but the level of & # 39; acceptable & # 39; Oil price is falling, Malek said.

"The bar goes down, it's only very gradual. In a few years, I expect $ 50 to be an acceptable price for oil. At that time, Saudi Arabia and OPEC could regain this market share, and then it will become more competitive, "JP Morgan's CEO told CNBC.

"I have no doubt that the US shale, like any other basin in history, will reach its peak, reach a plateau and then sink again," Saudi Arabia's Energy Minister Khalid al-Falih said in Vienna this week. as Bloomberg reported.

The OPEC may have to wait At least half a decade to a decade when the US shale reaches its peak.

But for OPEC it is not sustainable to just wait for the climax – the longer it waits, the harder it will be to regain global oil market shares.

While the immediate OPEC target is clear, analysts are wondering if these cuts could be sustainable in the longer term and what the final of the cartel looks like.

OPEC and their allies have no other clear ending than to push back the inevitable time. This will not stop the age of supply, "said Ed Morse, Global Head of Commodity Research at Citi, to CNBC. See also: Why Natural Gas Prices Collapsed

The cuts are a "largely defensive" measure as the main causes of OPEC + producers are now vulnerable to low oil prices and their inadequate revenues, Morse said.

The extension of OPEC + cuts should be considered constructive, said Warren Patterson, head of commodity strategy at ING, expecting higher oil prices for the remainder of the year.

Nonetheless, the market was at least unaffected by the overshooting of cuts – oil prices reacted worst to an OPEC meeting in years, falling more than 4 percent as concerns over demand continued to outperform optimistic sentiment.

"Then there's also the question of how sustainable these cuts will be in the longer term, as US producers are more than happy to fill the gap created by the OPEC + cuts," Patterson said ING.

The higher the price of oil managed by OPEC managed by the market The cuts will offset these cuts with more US shale, which will benefit from higher prices.

OPEC's final may not be clear, but its current goal of balancing the market (and supporting prices) is linked to cedar competing manufacturers, especially US shale.

By Tsvetana Paraskova for Oilprice.com

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