By Barani Krishnan
OPEC keeps pointing to Big Bad Shale as a reason to keep cutting production beyond 2020.
And fears of storm damage to oil installations in the Gulf of Mexico along with Britain’s unexpected emergence as Iran’s new enemy in the Tehran’s sanctions drama briefly drove crude prices to seven-week highs Thursday before the market paused for a breather.
New York-traded West Texas Intermediate crude settled down 23 cents, or 0.4%, at $60.20 per barrel, after shooting earlier to $60.93, its highest since May 23.
London-traded Brent, the benchmark for oil outside of the U.S., slipped by 49 cents, or 0.7%, to $66.52. It rose to $67.64 earlier, its highest intraday high since May 30.
Week-to-date, WTI is up 5% while Brent is higher by almost 4%. On Wednesday, both benchmarks enjoyed 4.5% rallies. For the year, U.S. crude is showing a 33% hike and its U.K. peer a 24% gain.
Oil’s latest spike came after the Organization of Petroleum Exporting Countries, which pumps 40% of the world’s oil, estimated in its July report released on Thursday that it will be producing about 560,000 barrels per day more than needed by next year, no thanks to the continued surge in U.S. shale oil output.
The report meant that the Saudi-led OPEC and its key non-member ally Russia, will be cutting production indefinitely after agreeing just last week to review in March 2020 ongoing output reductions.
“Even if OPEC ends up believing that shale oil production will decline, they are not taking any chances. They have been burned before,” prominent energy analyst Anas Alhajji said via Twitter.
OPEC is “going to take the highest production growth out there” to figure out its response in output, Alhajji added. “If shale doesn't deliver, they will love it. If it does deliver, they are safe.”
On the storm watch end, U.S. oil producers cut nearly a third of the crude output from the Gulf of Mexico ahead of Tropical Storm Barry, which was headed for an already water-logged New Orleans, where it was forecast to make landfall by late Friday or early Saturday as the first Atlantic hurricane of the 2019 season.
On the Middle East’s high seas, Iran reportedly attempted to seize a British oil tanker in the Persian Gulf in a tit-for-tat for last week’s arrest of an Iranian VLCC by U.K. forces in Gibraltar, CNN reported. The attempt was thwarted by a British warship which warned the Iranian Revolutionary Guards boats away, the report said. Tehran denied the entire affair.