All bets are off as US shale producers look set to take an aggressive stance towards production in 2019.
After years of strategic spending to boost production and market share, US shale producers have made strong strides in returning healthy profits. New algorithms and drilling techniques are revolutionising the cost, efficiency and speed at which oil can be extracted. This modern-day gold rush is already turning ambitious engineers in west Texas into multi-millionaires.
Next year looks set to power the shale revolution even more. Increasing productivity, lower tax rates and access to low-cost funding will drive the cost of fracking ever lower.
Thanks to US shale, Opec+ is currently caught between a rock and hard place. Nearly every single Opec+ member is facing large fiscal deficits in 2019, meaning they need oil prices to be as high as possible to meet their financing requirements. The obvious way to drive oil prices up is to cut production.
This is precisely how Opec+ has responded to oil market volatility, agreeing in early December to a further round of production cuts. It took two strenuous days of wrangling but Opec+ confirmed a reduction of 1.2 million barrels per day from October levels, to last for six months, with a review scheduled in April 2019. The ambition is to rebalance the current oversupply in oil markets.
The decision shows just how important oil prices are, as Opec+ sacrifices market share in return to ensure prices remain high in the first half of 2019. Helped along by further declines in Iranian and Venezuelan oil production, Opec+ seems to have done enough for now. However, potentially higher oil prices won’t hold for long – spring will come around all too quickly for Opec+.
Opec+ members know all too well what this means for US shale. Khalid Al Falih, the Saudi energy minister, declared that “US producers will be breathing a sigh of relief” following the Opec+ agreement to cut production. Shale producers have already beaten expectations in 2018, now Opec+ is giving them even more of an incentive to hit their targets in the new year. Mr Al Falih told reporters in Riyadh this month that he was certain Opec+ will continue to trim production when the current agreement comes to an end in four months’ time, saying: “We need more time to achieve the result.” The concern is that this will only provide more time for US shale to maximise their output and gain further market share.
The prospect of higher oil prices also benefits shale producers, helping them improve their balance sheets and fund more investment into increasing production and efficiency.
What does this all mean for oil prices if Opec+ are trying to push them higher in the face of intense pressure from the US?
Brent oil prices reached a record high in October 2018 at $86 per barrel, their highest level since November 2014. It then precipitously fell to its lowest point this year at just above $50 per barrel. These wild volatile lurches are likely to continue going into 2019 as US shale producers put all their efforts into winning the tug of war.
Opec+ faces other pressures too, which mean its rope is already fraying. On the demand-side of the equation, US-China trade tensions are slowing global growth, the Fed has signalled that it plans to slow the pace of hikes in 2019 and Chinese President Xi Jinping has offered no new reforms to stimulate the world’s second largest economy. Opec+ has very little influence over any of these, all of which are likely to curb the global appetite for crude. If they do, prices will go lower despite Opec’s best efforts.
Whilst most investors deem that Opec+’s action to curb a further 1.2 million bpd from the market may be enough to lift prices in the near-term, in tandem, US shale is likely to continue growing at a remarkable rate. This will hamper Opec+ countries with the prospect of an endless iteration of cuts that simply results in them making way for shale. However, Opec+ may get some respite in mid-2019, if the US turns more hawkish and toughens more Iranian crude off the table, which will likely prop up oil prices somewhat.
Heading into 2019, Opec+ producers are increasingly coming to terms with the resilience of the shale industry and adopting the mantra that if you can’t beat them, then learn to live with them. Shale has established itself as the firm global swing oil producer. It’s hard to see it coming second place.
Ehsan Khoman is Head of MENA Research and Strategy at MUFG.
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Yemen's Bahais and the charges they often face
The Baha'i faith was made known in Yemen in the 19th century, first introduced by an Iranian man named Ali Muhammad Al Shirazi, considered the Herald of the Baha'i faith in 1844.
The Baha'i faith has had a growing number of followers in recent years despite persecution in Yemen and Iran.
Today, some 2,000 Baha'is reside in Yemen, according to Insaf.
"The 24 defendants represented by the House of Justice, which has intelligence outfits from the uS and the UK working to carry out an espionage scheme in Yemen under the guise of religion.. aimed to impant and found the Bahai sect on Yemeni soil by bringing foreign Bahais from abroad and homing them in Yemen," the charge sheet said.
Baha'Ullah, the founder of the Bahai faith, was exiled by the Ottoman Empire in 1868 from Iran to what is now Israel. Now, the Bahai faith's highest governing body, known as the Universal House of Justice, is based in the Israeli city of Haifa, which the Bahais turn towards during prayer.
The Houthis cite this as collective "evidence" of Bahai "links" to Israel - which the Houthis consider their enemy.
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Director: Tom Tykwer
Starring: Tala Al Deen, Nicolette Krebitz, Lars Eidinger
Rating: 3/5
TOUCH RULES
Touch is derived from rugby league. Teams consist of up to 14 players with a maximum of six on the field at any time.
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A touchdown is scored when an attacking player places the ball on or over the score-line.
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Haemoglobin disorders explained
Thalassaemia is part of a family of genetic conditions affecting the blood known as haemoglobin disorders.
Haemoglobin is a substance in the red blood cells that carries oxygen and a lack of it triggers anemia, leaving patients very weak, short of breath and pale.
The most severe type of the condition is typically inherited when both parents are carriers. Those patients often require regular blood transfusions - about 450 of the UAE's 2,000 thalassaemia patients - though frequent transfusions can lead to too much iron in the body and heart and liver problems.
The condition mainly affects people of Mediterranean, South Asian, South-East Asian and Middle Eastern origin. Saudi Arabia recorded 45,892 cases of carriers between 2004 and 2014.
A World Health Organisation study estimated that globally there are at least 950,000 'new carrier couples' every year and annually there are 1.33 million at-risk pregnancies.
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Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
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Date of Birth: April 25, 1993 Place of Birth: Dubai, UAE Marital Status: Single School: Al Sufouh in Jumeirah, Dubai University: Emirates Airline National Cadet Programme and Hamdan University Job Title: Pilot, First Officer Number of hours flying in a Boeing 777: 1,200 Number of flights: Approximately 300 Hobbies: Exercising Nicest destination: Milan, New Zealand, Seattle for shopping Least nice destination: Kabul, but someone has to do it. It’s not scary but at least you can tick the box that you’ve been Favourite place to visit: Dubai, there’s no place like home
F1 2020 calendar
March 15 - Australia, Melbourne; March 22 - Bahrain, Sakhir; April 5 - Vietnam, Hanoi; April 19 - China, Shanghai; May 3 - Netherlands, Zandvoort; May 20 - Spain, Barcelona; May 24 - Monaco, Monaco; June 7 - Azerbaijan, Baku; June 14 - Canada, Montreal; June 28 - France, Le Castellet; July 5 - Austria, Spielberg; July 19 - Great Britain, Silverstone; August 2 - Hungary, Budapest; August 30 - Belgium, Spa; September 6 - Italy, Monza; September 20 - Singapore, Singapore; September 27 - Russia, Sochi; October 11 - Japan, Suzuka; October 25 - United States, Austin; November 1 - Mexico City, Mexico City; November 15 - Brazil, Sao Paulo; November 29 - Abu Dhabi, Abu Dhabi.
