A Bottom in Oil Prices, But No Top in US Production

As we predicted when crude prices were sharply lower two weeks ago, OPEC+ has cut its production sharply, including the extension to the end of the year of cuts already announced by Russia. The Biden administration missed a bet by “not being in a hurry” to replenish the Strategic Petroleum Reserve at about $70 WTI, as it had said it would do in December. Global storage levels continue to point to crude prices above $100. In the US shale skeptics continue to argue that high-quality wells are gone, and that producers will not be able to respond to better price incentives. In reality estimated ultimate recovery continues to rise for US shale, even as initial production rates fluctuate mostly in response to volatile pandemic-era price swings.