Why OPEC/non-OPEC oil producers are determined to continue to support oil price recovery despite shale oil production growth?
It is because:
1- OPEC/non-OPEC oil producers will make more revenue at an oil price of $70/bbl than when oil price is around $30/bbl or $40/bbl, provided that each producer is only cutting a small portion of their oil output. A simple math will show how that works.
2- Team work/collaboration: OPEC/non-OPEC oil producers have managed to drive oil prices up from around $30/bbl by cutting 1.8 million barrel of the market. That was done by a group of more than 20 oil producers. The large number of oil producers participating in the oil output cut deal minimized the impact and the amount oil output each producer has to cut, while producing the same result in driving oil price up.
Based on the above two reasons, and the possibility of recruiting more oil producers to join the output cut deal as well as the commitment of the two biggest oil producers (Saudi Arabia and Russia) to extend their support to the oil output cut beyond 2018, it is expected that we may see a collaboration for the long term which could succeed in stabilizing the oil price around its current level.
