by Todd Heltman and Jeff Wyll, Senior Energy Analysts, Global Equity Research, Neuberger Berman
The oil patch has come into focus in the wake of OPEC’s extension of production cuts and the resilience of U.S. shale producers. This week’s guest writers, longtime energy analysts for our Global Equity Research team, assess recent developments and what may come next.
Back in November, OPEC managed to surprise oil skeptics by agreeing to substantial production cuts—a reduction that was complemented by additional cuts from a number of non-OPEC producers, including Russia. The subsequent rally, tied also to bullish sentiment around the Trump election victory, brought oil prices back to a more profitable mid-$50s level and seemingly on their way to $60.
The optimism, however, was relatively short-lived. After holding onto price gains for a few months, markets became more pessimistic on the significant production response from U.S. shale producers (and renewed concern about a global oil glut). A recent move by OPEC and other oil producers to extend the reduction for nine additional months was met with disappointment given hopes that the cuts would be either deepened or made permanent.
So, where do we go from here? All eyes are once again on two key movers of today’s oil market, OPEC and U.S. shale companies.