Breaking News
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Did OPEC Regain Full Control Of The Market?

By Faisal Faeq CommoditiesOct 12, 2021 02:15AM ET
Did OPEC Regain Full Control Of The Market?
By Faisal Faeq   |  Oct 12, 2021 02:15AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
Oil prices made their 5th weekly gains and rose to the highest levels since November 2014. Though both Brent and WTI surpassed the $80 per barrel mark since the beginning of October, OPEC+ decided to maintain its output strategy to increase output by 400,000 barrels per day (bpd), despite the growing signs that the market may need a larger hike to mitigate the global energy crunch, as demand picks up and winter nears.
It is not OPEC+'s decline to the demand increase that sent prices to new highs, but rather mostly the demand continuing to outpace supply by 1.2 million bpd in October and 900,000 b/d in November according to S&P Global Platts. OPEC+ elected to continue its cautious approach to monitor global markets' developments as producers have shown great agility to respond to market needs as supply/demand balance dictates.
Supply tightness and the continued draw on global oil inventories have been exacerbated by the decrease in US supplies. This is in addition to the substitution of some oil refined products to generate electricity as a result of the prolonged period of high energy prices caused by the lack of gas and coal supplies globally.
With WTI crude prices breaching the $80 per barrel mark for the first time since the end of 2014, US crude oil production would have been expected to jump beyond its pre-pandemic peak of 13 million bpd, and yet, it's still around 11.3 million bpd; oil price level should have enticed production growth.
OPEC+'s maintaining of its schedule to gradually up monthly production by 400,000 barrels per day every month until at least April 2022 to phase out 5.8 million bpd of existing cuts shouldn’t be triggering a surge in crude prices, despite the pressure faced to produce more to help lower prices as demand has recovered faster than expected in certain parts of the world.
Keeping to its output strategy shows that OPEC+ appears to be very much in control of the oil market. Even if the OPEC producers' market share wasn’t ever thought to be threatened by shale producers, OPEC+ producers have regained control of the market amid the disappearing influence of the marginal barrel producers.
Since 2012 onwards, US shale oil used to add nearly one million bpd annually, causing some disruptions in conventional supplies from western Africa. Back then, shale oil was considered marginal barrels that represented a tiny proportion of the global supplies and fit in the gap between supply and demand. However, when the deficit became larger in 2014, oil prices crashed from above $100 per barrel to the mid-$50s because shale barrels added more to the market in addition to OPEC output strategy back then.
As per the US Energy Information Administration (EIA), US shale oil output rose to 8.1 million bpd in September, the highest since April 2020. Hence, US shale should not be considered as a marginal barrel with this volume.
Moreover, US crude oil exports so far this year have averaged around 3 million bpd. Hence, US shale isn't short-cycled, but continues to impact global supply demand balance. This means that even if OPEC+ has regained control of the market after the pandemic outbreaks on oil demand, US shale oil is still massively needed to respond to oil demand growth, even if some still consider it as a marginal barrel.
Did OPEC Regain Full Control Of The Market?

Related Articles

Phil Flynn
Energy Report: A Systemic Risk By Phil Flynn - Oct 15, 2021 4

The Biden administration is faced with a growing energy crisis and is expected to announce a plan that climate change is a systemic risk to the financial system. The real...

Gregor Horvat
Crude Oil: A Pullback Awaits By Gregor Horvat - Oct 15, 2021 1

Energy markets are higher, but crude oil prices remain in a wedge. Traders should be wary of an upcoming resistance and a pullback if the price breaks through the trendline...

Did OPEC Regain Full Control Of The Market?

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email