US Shale Oil Production Rising Amid Strengthening Dollar
Despite OPEC’s desire to keep its stranglehold on the market, U.S. shale oil production looks to rise again amid a strengthening dollar.
Commerzbank analyst Carsten Fritsch notes the 23-week decline in U.S. drilling activity seemed to have stopped, while the pricing level needed to increase production is being aided by “the significantly appreciating U.S. dollar,” Reuters reports. Tuesday, the prices for Brent and West Texas Intermediate were both down 75 cents, coming in at $64.77 and $58.97 per barrel, respectively.
Goldman Sachs came to a similar conclusion, stating only one well was cut from the production rolls last week, adding producers would ramp production back up “given improved returns” were WTI to remain near $60/barrel. Meanwhile, Morgan Stanley says “the USD downward correction is complete,” making dollar-priced commodities like oil more expensive for those who buy with other currencies.
Increased production would also head-off the potential for a tighter oil market down the road, though with OPEC’s ongoing strategy to hold the line regarding its own production targets among the member states involved — a strategy not likely to change when the group meets in Vienna next month — the possibility for an ongoing oil glut remains.