Parties to the Dec. 7 agreement limiting oil production had to take seriously messages coming from the US—but not tweets from the White House. OPEC, led more than ever by Saudi Arabia, and its partners in production restraint, led by Russia, agreed to cap production in the first 6 months of 2019 at 1.2 million b/d below October output. Of that, 800,000 b/d is to come from participating OPEC members and the rest from nonmember collaborators.
Most important is that the fractious assembly recognized surplus and acted in defiance of harangues from US President Donald Trump. Participating countries cannot afford another price crash. Saudi Arabia and other Persian Gulf exporters have spent themselves beyond the ability to buy security and tranquility with oil money. And Russia’s economy remains sluggish and too dependent on oil.
For the petrostates of old, the world has changed. An end to oil-demand growth is in murky view. Competitive supply billows, much of it in North American shale plays promptly responsive to crude-price changes. And external dependencies are not what they used to be.
In the week ending Nov. 30, the US became a net oil exporter for the first time since the 1940s. Exports topped imports by only 211,000 b/d, says the Energy Information Administration, so the status might not last. As recently as late 2005, however, the US was importing a net 13 million b/d of crude and products. And questions are subsiding about how long production can increase.
For two Delaware basin formations in Texas and New Mexico, the US Geological Survey on Nov. 28 reported “the largest continuous oil and gas assessments ever released.”
Estimated mean technically recoverable, undiscovered resources of the Wolfcamp shale and overlying Bone Spring formation, USGS said, are 46.3 billion bbl of oil, 281 tcf of natural gas, and 20 billion bbl of NGLs.
Under current and prospective conditions, braying against oil-supply restraint looks misguided. In an oversupplied market, somebody cuts.
(From the subscription area of www.ogj.com, posted Dec. 7, 2018. To comment, join the Commentary channel at www.ogj.com/oilandgascommunity.)