Crude Slips as `Phenomenal’ Shale Output Overshadows OPEC Cuts

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By Jessica Summers

American shale boom to persist at least through 2020: U.S.

OPEC, Russia exploring extension of accord beyond end of year

Crude in New York and London slipped on expectations for robust supply growth from U.S. shale through the end of the decade.

The U.S. benchmark fell as much as 0.2 percent while Brent futures pushed 1.4 percent lower on Tuesday. Comments by OPEC leaders about shrinking the worldwide crude glut and a post-2018 extension of output limits were overshadowed by prospects for unrelenting expansion in American shale fields.

U.S. oil output is on track for “phenomenal,” growth, U.S. Deputy Energy Secretary Dan Brouillette said in an interview in London. “We are optimistic about 2019 and 2020, too.”

Crude is holding above $60 a barrel in New York, though futures are trading below last month’s highs. Although the Organization of Petroleum Exporting Countries and allied producers have succeeded in whittling away most of the glut that triggered the worst market collapse in decades, American explorers have been pumping crude at record rates.

West Texas Intermediate for March delivery, which expires Tuesday, slid 4 cents to $61.64 a barrel at 10:01 a.m. on the New York Mercantile Exchange. The more active April contract traded at $61.68.

Brent for April settlement dropped 69 cents to $64.98 on the London-based ICE Futures Europe exchange. The global benchmark traded at a $3.30 premium to April WTI.

See also: U.S. Crude Gap to Brent Slimmest in Six Months as Supply Drains

The Bloomberg Dollar Spot Index, a gauge of the currency against 10 major peers, rose as much as 0.6 percent. A stronger greenback typically reduces investors’ interest in commodities.

After about four years of surplus, supplies will come back into balance with demand in the second or third quarter, earlier than previously estimated, according to people familiar with OPEC’s and its partners’ deliberations. Those calculations assume that Libya and Nigeria maintain output at January levels.

“Prices are vulnerable to the downside over the coming months,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “Though the market likes OPEC and its allies’ show of unity, we still need to see how U.S. shale companies will react on higher prices and eventually offset all the efforts of OPEC and others to reduce inventories.”’

Oil-market news:

Maintaining the OPEC alliance with other producers including Russia would help avoid future supply gluts or shortages, United Arab Emirates Energy Minister Suhail Al Mazrouei said in a Bloomberg TV interview, adding he hoped the alliance would last “forever.”
BP Plc CEO Bob Dudley expects oil and gas to remain in demand for decades as population growth fuels energy consumption, particularly in Asia and Africa, he said in London.
Gasoline futures rose 0.8 percent to $1.7641 a gallon.
— With assistance by Rakteem Katakey, Tsuyoshi Inajima, Heesu Lee, and Javier Blas

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