“Nine months with the same level of production that our member countries have been producing at is a very safe and almost certain option to do the trick,” Saudi energy minister Khalid al-Falih told reporters at the cartel’s Vienna headquarters.
While U.S. output quickly declined along with falling prices in 2016, shale producers have quickly pumped out more this year on the modest price recovery. According to the U.S. Energy Information Administration, American oil output could hit a record high of 9.9 million barrels per day, or closely mirroring the level Saudi Arabia has limited itself to.
Technological improvements and greater efficiency has helped U.S. shale producers pump out crude oil at lower margins – some say it is now profitable at less than $50 per barrel. Additionally, companies are finding easy access to credit and private-equity firms have bought out struggling companies, which have kept production flowing.
Consequently, oil traders are wary that OPEC’s new pledge will do any real support to the depressed prices.
“It is a disappointment that OPEC hasn’t done more to balance the markets,” Olivier Jakob, energy markets analyst at Swiss consultancy Petromatrix, told CNBC. “A nine-month extension of the output cuts is already baked into prices. This shows there’s not much more OPEC can do.”
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