Related: Oil Surge Stirs USO Options Activity
Advances in U.S. shale oil production technologies are contributing the to supply surplus and weighing on any oil price gains. It has become much cheaper for the upstart U.S. shale producers to extract oil out of the ground, sparking U.S. oil output to its highest levels since the 1970s.
“To be sure, OPEC and Saudi Arabia have no official price target and say the objective of the production cut is to balance supply and demand, and reduce the inventory glut,” reports Reuters. “But guidance on preferred price levels comes from officials speaking off the record, and from industry sources who have discussed the issue with Saudi officials.”
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