ICE Brent contracts rose to over US$40/bbl in March, setting a 2016 high. Despite ominous economic signals from China, and crude exports dropping by a quarter in February, supply forecasts have supported global crude benchmarks this month.
Representing a pivot point from the supply rise odyssey, leading shale producers have told the markets they predict a decline in output – albeit a smaller one than anticipated. Although the resilience of US shale producers has been strong, which is a tribute to technical expertise, it was inevitable that the price drop would suppress output sooner or later.
Hope for crude bulls has increased further as OPEC is unlikely to slash production in the near future. It appears the cartel is waiting to gauge the strength of Russia’s commitment to freeze production levels following its announcement in February, and how much oil Iran is planning to pump into the market.
About the authors
Lyuda Sokolova is a director with KPMG in the UK
Thomas G. Ruck is a director with KPMG in the US
Oliver Hsieh is an associate director with KPMG in Singapore