A Good Friday U.S. Shale

Oil prices soared on Friday after OPEC, led by Saudi Arabia, engineered a 503,000 barrel per day production cut, bringing the total cut to 2.1 million barrels. The split called for an additional 372,000 barrel cut by OPEC as well as an additional 131,000 barrels a day by non-OPEC led by Russia. While prices this morning are filling in some of the run-ups from Friday, there is little doubt that this move should put in a floor for prices and even have the bears raise their oil price forecasts.

Saudi Arabia led the way. Reports say that Saudi Arabia's new production quota will fall from 10.3 million barrels a day down to 10.14 million barrels. Market Watch reported that the Kingdom has only produced 9.9 million barrels per day of late to help offset a global glut of oil. The prince insisted the Saudis will cut well below its quota and hold production at close to 9.75 million barrels a day in early 2020, about 400,000 barrels below its quota.

The new Saudi Energy Minister, Prince Abdulaziz bin Salman, made a point that the production cut was a good thing for the United States. He was probably worried about a President Trump tweet and said, "It’s also a good Friday for our friends in Oklahoma and Texas." In the past President Trump has scolded OPEC and Russia about production cuts but so-far the President has remained  silent. Perhaps he is starting to feel the heat from U.S. oil producers that need a higher price to thrive. 

Bin Salman tried to play hero by saying that, "We want to be more helpful. I think the world expects us to lead. When the market requires some stabilization, we come to the aid of the market." Here they come to save the day. Yet he has a point. President Trump touts his pro energy policies but he has not been helpful on price. In fact in many ways it has been a very challenging year for U.S. shale producers. The Saint Louis Dispatch says that bankruptcies are rising in the oil patch, with Texas law firm Haynes and Boone counting filings by 33 producers in the first nine months of this year, up from 28 in all of 2018.

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