Opec and allies under rising pressure to manage long-term output
THE battle between Opec and shale oil producers can be characterised as a two-round fight. In the first round, shale producers gained market share and the price of crude crashed. In the second, Opec curbed output as shale producers adapted to the lower prices.
Now, get ready for Round 3, as Opec and Russia try to plot a way out of their production cuts but likely get stymied by market twists and turns that upset their calculations.
The approach of Opec and its allies for the coming year is clear. Brent crude has just risen above US$70 per barrel, apparently confirming the success of Opec's plan. Production cuts have been extended until the end of 2018, and excess inventories are being drawn down.
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