Saudi Arabia matters

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The political upheaval in Riyadh has given a jolt to oil prices this week, with crown prince Mohammed bin Salman purging his rivals and consolidating power. Oil analysts see this as increasing the odds of an extension of OPEC’s production cuts. “While the likelihood of a disruption to supply remains low, we believe the events raise the probability of Saudi Arabia taking a more aggressive stance on production curbs. The risks now lie towards curbs remaining in place longer than expected,” Daniel Hynes, an analyst at Australia & New Zealand Banking Group, told Bloomberg. Saudi Arabia also said that it would slash oil exports from November to December by 120,000 bpd.

OPEC shrugs off peak oil demand. In OPEC’s World Oil Outlook, it estimated that oil demand will rise by more than 15 mb/d through 2040, dismissing the growing number of predictions regarding peak demand in the next decade or two.

OPEC revises up expectations of U.S. shale supply. OPEC released its annual World Oil Outlook this week, in which the group dramatically upgraded its expectations for U.S. shale. OPEC sees U.S. shale output ballooning from 5.1 million barrels per day (mb/d) this year to 7.5 mb/d by 2021. That is an upward revision of more than 50 percent – last year OPEC predicted U.S. shale output would erode under the weight of low oil prices, dipping to just 4.8 mb/d by 2021. In other words, OPEC has essentially acknowledged that it won’t be able to kill off U.S. shale by flooding the market. < Keep in mind that U.S. conventional production is on steady decline.