Like I said earlier, oil prices will continue to climb supported by OPEC/non-OPEC oil output cut until it reaches a level high enough to encourage U.S. oil producers to increase their oil output and ramp up drilling activities. At such price level, OPEC members will start to be worried about the growth of shale oil production in the United States.
As oil prices currently near $70/bbl, it looks like we have reached to that point as the first OPEC’s member country voiced out its worries over the potential of growth in shale oil production at an oil price level above $60/bbl.
Today, Iran’s oil minister Bijan Namdar Zanganeh stated that OPEC members are not keen to drive oil prices above $60/bbl because of the potential of growth in shale oil production at such price level. It should be noted that Iran is in fact not cutting its oil output, it is only limiting its oil output growth as the country is trying to boost its oil output to pre-sanctions level.
Iran will not be the last OPEC member to comment on this matter, and soon enough Saudi Arabia and others will follow course. It is a matter of time until they start to see an uptick in both U.S. crude oil production and drilling activities. Then, they will start to question their commitment to continue their oil output cut.
