In the same week that Saudi Arabia and Russia proposed freezing production, many of the world’s biggest oil exporting nations have had their credit ratings slashed. These are tough times to be in the business of selling oil, and even if OPEC+Russia are able to succeed in their plan to freeze production and induce a rebound in prices (an unlikely feat, due to Iran), there are plenty of producers that this coalition can’t control. Take, for example, U.S. shale, which Bloomberg reports would see a resurgence if prices recover:
Shale output will come back if oil prices rise to $50 a barrel, Ian Taylor, chief executive officer of Vitol Group BV, the world’s largest oil trader, said in an interview before the Saudi-Russia deal was announced. “It looks clear that a lot of the oil that’s probably going to be shut down in the next year or so because it is simply too low a price, some of it could come back,” he said.
But if and when prices start to rebound, whether that happens as a result of a pick-up in demand (hard to imagine, given China’s slowing growth) or OPEC coordination to reduce supply, U.S. shale producers won’t have to go to great lengths to restart production. After all, they’ve been drilling but not yet fracking wells for months now, producing what’s come to be known as a “fracklog,” which is set to flood the market with new supplies just as soon as market prices make it profitable to restart operations