Analysis: OPEC+ in driver's seat as oil supply growth lags demand

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The surprise oil output cuts announced on Sunday by OPEC+ members illustrate their greater power over the market, given limited supply growth by other producers such as U.S. shale firms and still-growing demand despite the energy transition.

Oil has jumped to $85 a barrel since members of the Organization of the Petroleum Exporting Countries and allies including RussiaWhile OPEC or OPEC+ decisions to cut output in the past have drawn warnings that higher prices and lower OPEC+ output would encourage U.S. shale producers to pump more, officials have not voiced such concerns recently.

U.S. shale oil drillers over the last two decades helped to turn the United States into the world's largest producer. But the gains in output are slowing and executives warn of future declines., with some respondents citing higher costs and interest rates. OPEC has this year been lowering its U.S. shale oil output forecast, having also done so in 2022.

But, the IEF said, annual upstream investment will need to increase to $640 billion in 2030 to ensure adequate supplies.

 

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