By Holly Ellyat
Analysts in Citi’s commodities research team warn that the shale gas and oil revolution in the U.S. has been ignored for too long by OPEC, the powerful group of 12 global oil producers, and it must agree to cut production when it meets on Thursday or else oil prices “will resume their slide.”
“The reality of the shale revolution in the U.S., long scoffed at from within OPEC as high-cost folly, is now hitting the producer group where it hurts, while oil demand growth has underperformed significantly,” a group of Citi energy analysts said in a report published late on Monday.
“After years of inaction, the shale revolution [has issued] the producer group with a wake-up call, against a weak demand backdrop,” Citi analysts Seth Kleinman, Eric Lee, Christopher Main, Edward Morse and Anthony Yuen, said in their “Energy Weekly” report.
The analysts’ comments come ahead of OPEC’s meeting in Vienna on Thursday (November 27), a meeting at which the group could decide whether to reduce oil production in the face of a steep decline in the oil price since the summer.
The price of Brent crude for January delivery has fallen around 30 percent from a high of $115 per barrel (pb) in June to currently trade around $80pb amid a global over-supply. On Tuesday, Brent crude futures were trading at $79.43.
Iran, Venezuela and Ecuador have put pressure on fellow OPEC members to reduce oil output to stem falling prices but, so far, OPEC’s biggest producer and exporter Saudi Arabia has shown no signs of being ready to cut.Read more