Peiyang Chemical Equipment Co., Ltd.
The Reduction of Output in the United States The Voluntary Restriction of Export in Saudi The Price

After three years of ups and downs in the oil market, there's some good news this week. There are indications that US shale producers and OPEC are cutting production.

In the past four weeks, the number of wells produced in the United States has fallen for two weeks. Anadarko Petroleum oil company announced spending cuts in the earnings report in the second half of 2017, and oil services company Halliburt also said that many customers are slowing production.

Besides, Saudi Arabia, after meeting with Russia in St Petersburg on Monday, said it would limit its oil exports to the United States, while Nigeria also agreed to limit its production to 1 million 800 thousand barrels a day.

Thus, the price of oil has been up to 48 dollars a barrel.

The producers of shale oil are flexible

"We know that shale oil production in the United States can be rapidly reduced," says Mark James, an energy analyst at Raymond Robert. "Oil prices down by $five or six or $seven would be enough to stop production for these producers."."

The crude oil inventories in the United States fell by 10 million barrels a barrel. The week by July 21st, , according to data released Tuesday by the American Petroleum institute, American crude oil has been reduced about 4 times as much as analysts expected.

Two weeks ago, Halliburton estimated that the number of wells produced in the United States will hit 1000 by the end of the year. Then, as demand for services rises, costs will rise, resulting in that the number will not grow again. As of last week, a total of 950 wells were operating in the United States.
As Mark said, shale oil margins are small, and some parts of the United States, such as the Permian Basin in Texas, have lower production costs than anywhere else in the country. Last week, the United States produced about half of its oil fields in Texas. These low-cost areas can keep running when the price of oil is 40 dollars, but it is not necessary for other areas. They can't make money when the price of oil is too low.
This makes the price of oil will also have a limit, because once the price of oil increases to $50 or so, more manufacturers in other parts of the United States will join into the production force, improving the supply of crude oil which will not make oil prices into a further rise.

Saudi makes an attempt at reducing the sock of the United States

Saudi Arabia is working to reduce exports to the United States to help boost oil prices. It knows that the weekly reports of the EIA are producers, analysts and traders, and Saudi Arabia has begun recycling oil exports to the United states.

In this week, Saudi Arabia said it would set its export cap to 6 million 600 thousand barrels a day, much less than a year ago. This does not necessarily mean that it will transport oil to other parts of the world, but it should have an impact on the amount of inventory in the United states. Before these inventories fell, it was difficult to see oil prices exceeding $50.

Mark believes that this situation will eventually happen, when oil producers will be able to more clearly predict the future development. He said: "now the world oil market oversupplies, and if you reduce these stocks, then you will have a more standardized industry, so you can take a look at the overall situation."