Commodities: Oil prices and shale industry

Oil prices increased on Wednesday. The price of Brent crude futures rose 74 cents or 1.25% to $63.12. The price of West Texas Intermediate (WTI) futures increased by 81 cents or 1.4% to $58.21 a barrel. There are many factors that determine oil prices. It is worth mentioning that oil prices increased by 7% since the beginning of the month. Read more about the Shale industry.

One of the major reasons which supported the oil prices is falling oil stocks. Another important reason is the ongoing trade war. U.S. and China reached an agreement to meet in Washington, D.C. in October. Even though the exact date remains unknown. Any good news regarding the trade war is enough to affect the oil prices and global economy in general.

Moreover, there is another story connected to the oil sector. Oil is a valuable commodity, and for several countries, it is the major source of income. For example, Iraq even failed to comply with a deal prepared by OPEC as they couldn’t lower the oil production.

However, the Iraqi government is ready to follow the deal they signed in 2017. Two days ago Oil Minister of Iraq Thamer Ghadhban said that Iraq would also reduce the daily oil production. He also made an interesting comment regarding the oil cuts. The oil minister said that OPEC members would discuss what to do with oil production.

This meeting will take place on Thursday. During the previous OPEC, meeting delegations discussed the possibility to increase the oil cuts. It means that can reduce oil production by 1.6-1.8 million barrels per day.

U.S Shale industry

U.S. investment bank Raymond James & Associates published a report about the U.S. shale industry. This report gives the opportunity to understand the current states of affairs of this sector. It is essential to mention that the shale industry played an important role not only on the local but international level as well. This industry helped to transform the U.S. oil sector. As a result, the U.S. became the biggest oil producer in the world.

According to this report which bank released at the beginning of the month, the U.S. shale industry is facing serious problems. One of the biggest is to achieve further productivity gains.  The oil production in the U.S. increased only by less than 100,000 barrels per day during the first seven months. This is a big problem because, during the same period of time in 2018, oil production increased by 600,000 barrels per day.

This issue might affect the oil sector. The U.S. shale industry problems will boost competitors. Moreover, this situation might decrease the influence of the U.S oil industry. This report underlines the importance of U.S. well productivity to the oil prices.

Another issue is that bank’s analysts wrote in a report that oil production might grow only by 350,000 barrels per day in 2020. If this is going to happen, this will be a severe blow to the shale industry. According to market expectations, oil production should increase by around 1.5 million barrels per day.

Oil prices increased on Wednesday. The U.S. shale industry problems are growing, which might seriously affect the oil prices.