Opec’s Falling Production Capacity Strengthens Saudi Control

As the second US shale revolution continues to gather pace, prospects for Opec being able to unwind its supply cuts in 2019 grow dimmer. Luckily for Opec, its ability to add sizeable volumes next year is also diminishing. The extent of the group’s “involuntary cuts” is growing and these are falling on those countries most likely to consider cheating, preventing them from reneging on any extended commitments.

The decline in oil prices since late 2014 has taken its toll on Opec’s more peripheral members. They have been unable to make the requisite investment to maintain, let alone grow, production capacity. Lower for longer oil prices are therefore translating into lower for longer production capacity. Opec’s market share is likely to remain depressed well into the next decade, and possibly beyond.


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