When US oil futures plunged below zero in April the country’s shale industry was knocked sideways. More than 100,000 US energy jobs have disappeared since the pandemic began and rig counts fell by 73% in the year to 17 July. A dearth of supply helped Brent crude rally by 120% since the April low. Trading above $43 a barrel this week, oil is still down by 33% this year.
US oil output bottomed out in the second week of June, say Derek Brower and Myles McCormick in the Financial Times, but better prices are now encouraging higher output, with US production up “by 1.2 million barrels a day over the past six weeks”. As Alexandre Ramos-Peon of Rystad Energy puts it: “It’s a slow, slow recovery, but it’s happening”.
America is not the only producer to be boosting supply. A recent deal by oil exporters’ cartel Opec and Russia will see supply curbs gradually eased from August. Saudi Arabia is frustrated that its allies are not honouring promised production cuts, says Jason Tuvey of Capital Economics. During recent negotiations, Riyadh reportedly threatened a repeat of the “price war” that tanked oil prices this spring. As prices recover the incentives for governments to cheat on their quota will only grow, and Saudi Arabia’s willingness to curb its own production in order to support prices will fall. This year’s “oil price war” may be over, but it could prove “a sign of things to come”.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
Christmas at Chatsworth: review of The Cavendish Hotel at BaslowMoneyWeek Travel Matthew Partridge gets into the festive spirit at The Cavendish Hotel at Baslow and the Christmas market at Chatsworth
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
Why undersea cables are under threat – and how to protect themUndersea cables power the internet and are vital to modern economies. They are now vulnerable
-
Warren Buffet invests in Domino’s – should you buy?What makes Domino's a compelling investment for Warren Buffet's Berkshire Hathaway, and should you buy the UK-listed takeaway pizza chain?
-
4Imprint makes a strong impression – should you buy?4Imprint, a specialist in marketing promotional products, is the leader in a fragmented field
-
Invest in Glencore: a cheap play on global growthGlencore looks historically cheap, yet the group’s prospects remain encouraging
-
Should you invest in Trainline?Ticket seller Trainline offers a useful service – and good prospects for investors
-
Key takeaways from the MoneyWeek Summit 2024: Investing in a dangerous worldIf you couldn’t get a ticket to MoneyWeek’s summit, here’s an overview of what you missed
-
DCC: a top-notch company going cheapDCC has a stellar long-term record and promising prospects. It has been unfairly marked down
-
How investors can use options to navigate a turbulent worldExplainer Options can be a useful solution for investors to protect and grow their wealth in volatile times.
