- Brent crude oil could slide below $60/bbl as a surge in U.S. shipments to Asia threatens to undermine the production cut deal between OPEC and its allies, according to ING analysts, in contrast to bullish views from Goldman Sachs (NYSE:GS) and others who see prices supported as strong demand soaks up supply from the U.S.
- While OPEC has complied with its 2017 production pledge, U.S. flows that are gaining a bigger slice of the Asian market may cause some countries to increase supplies, which could drag down crude prices after a rally of more than 40% since June, ING says.
- “The longer the deal goes on, it’s going to start falling apart,” ING commodities strategist Warren Patterson tells Bloomberg. “They continue to give market share away to the U.S.”
- Crude’s rebound since last year is encouraging U.S. drillers to pump even amid efforts toward spending discipline, and as U.S. output continues to expand, more exports will sail to Asia, the traditional bastion of Middle East producers, Patterson says.
- Asia is “a market that the Middle East does not really want to give up,” Patterson says. “We think compliance is likely to slip. The deal will still officially be in place, but once we get into 2019 there’s no chance that we will see some sort of deal.”
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- Now read: Energy Recap: The Impact Of Steel Tariffs On The Energy Sector
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