The oil cartel roped eleven other petrostates into an agreement to curtail production in 2017 and are currently working on extending that deal, but the output cut’s ultimate goal of eating away at the oil market’s glut of crude is being undermined by the actions of suppliers outside of OPEC—U.S. shale producers chief among them. Now, OPEC is revising upwards its estimates of how quickly supplies will grow outside of its membership this year by a whopping 64 percent.Why is this happening? Primarily because of the frackers:
By cutting costs and boosting efficiencies, U.S. shale has made itself capable of profitably producing $50 per barrel oil.The only way cutting production makes sense for OPEC is if they can subsequently get $75 per barrel, or thereabouts, to make up for the lost amount of production. And meanwhile frackers are gearing up elsewhere:
Vaca Muerta, which is Spanish for Dead Cow, is a shale gas and oil formation the size of Belgium in the heart of the region of Patagonia and is essential to Argentina being able to become self sufficient in energy.Argentina won't be in the game for a while yet, because labor and transportation costs are still obstacles to profitability, but it will be in the game eventually. The price of a barrel of oil was $115 as recently as 2014. It's been less than half that price for a long time now:
President Mauricio Macri hopes a pact he has negotiated with unions and provincial authorities will jumpstart investor interest in developing the field.