QUESTION ASKED: Is A Second OPEC Cut On The Cards?

The supply-cut deal has so far resulted in a surprisingly high OPEC compliance of more than 90 percent, thanks to the cartel’s leader and biggest producer, Saudi Arabia, which has been cutting deeper than pledged. But the market has already priced in this high compliance, and although oil prices jump for a few hours on every report of ‘extraordinary efforts’ and reassurance that members will strive for ‘full conformity’, they are stuck in a narrow band, kept in check by U.S. shale and record high inventories in America.

A key upside driver for prices would be an extension of the OPEC deal beyond its original expiry date at the end of June. Just over a month had passed since the beginning of the production cut deal when talk of extending the agreement started to intensify. OPEC is said to be prepared to extend the deal, and may also increase the cuts, if inventories fail to drop to a specified level, sources from the group told Reuters.

The current cut got prices up by about $10 a barrel, but also put lots of American shale oil fields back into production. Now that our frackers are leaner than ever, further OPEC cuts might not accomplish too much more than cede market share to our domestic producers.

Cool.