The discussion about OPEC’s oil supply has taken an unexpected turn: according to the former director of Saudi Arabia’s intelligence agency, the Kingdom would apparently be willing to cut production if non-OPEC states such as Russia were also to follow suit. That said, the likelihood of producers being able to agree on such concerted action is fairly low. Given the problems it is currently facing, Russia for example is hardly in any position to accept lower revenues from the sale of its crude oil.
In the US, on the other hand, there could well be a supply reaction in the foreseeable future. According to industry data provider Drilling Info and Reuters, the number of approved oil and gas wells plunged by 40% in November. In the three main shale oil formations – Permian Basin, Eagle Ford and Bakken – numbers declined by between 38% and just below 30%. This is likely to result in a lower rig count after a delay of some months. Because shale oil production in each rig declines by an estimated 60%-70% during the first year after production commences, this will probably have a visible impact on US oil production in the second half of 2015, though this will do little to reduce the oversupply envisaged in the first half of 2015.
Although Reuters reported a 340,000 barrel per day decrease in OPEC oil production to 30.3 million barrels per day in November, it still significantly outstrips the call on OPEC. What is more, the reduction was due first and foremost to renewed problems in Libya and to maintenance work in Angola – there are still no signs of any voluntary or lasting cuts in output.