Shale will beat OPEC as U.S. oil thrives at $40, Citigroup says 2017-08-18
U.S. shale oil
U.S. shale oil will prevail over OPEC as the two rivals compete in an oversupplied world market. Citigroup Inc.'s head of research said.

The Organization of Petroleum Exporting Countries and its allies may have boosted oil prices by cutting production, but they're losing revenue in the process and their position"is not sustainable over a long period," Citigroup's Ed Morse said in a Bloonberg television interview on Tuesday. On the other hand, U.S. shale drillers have adapted to survive prices as low as $40, he said.

Oil prices have lost 12% in London this year, trading near $50/bbl, as output curbs by OPEC, Russia and other partners fail to drain a global surplus.

U.S. shale explorers have boosted drilling and are poised to reach a record output next month, plugging some of the gap left by OPEC's cutbacks.

The steadiness of crude prices on the forward curve at about $50/bbl suggests that U.S. oil producers are active in using futures contracts to look in -- or "hedge"--their output for this year and next, according to Morse.

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