Baku, Azerbaijan, Dec.22
By Leman Zeynalova – Trend:
The tax reduction in the US is bound to assist shale oil producers, but US production was bound to grow in 2018 anyway, Spencer Welch, director of the oil markets and downstream team in the London-based IHS Markit told Trend.
US production has increased by almost 1 million barrels per day in the last year, growth in 2018 is inevitable, but perhaps not quite as strongly as in 2017, the expert believes.
“Of course higher US production will reduce the impact of OPEC's supply cuts, but the supply-cuts have actually worked very well, better than almost anyone expected at the start of 2017, inventories have reduced significantly and the oil price is more than $10 per barrel, higher, OPEC is very happy so far,” added Welch.
Commenting on the remarks made recently by Kuwait’s minister of oil, electricity and water Essam Al Marzouk that OPEC and participating non-OPEC countries may end the deal on oil production cut by late 2018, the expert said that definitely, tax reduction and subsequent shale output growth in the US casts shadow on these assumptions.
“We expect the supply-cut deal to last through 2018 but then gradually unwind through 2019. Increased US production could work 2 ways - it could increase inventories and reduce price and therefore force the deal to continue for longer or it could worry the supply-cutters that they are losing market share and therefore end the cuts. 2018 will be very interesting year for oil markets, but it is never dull,” Welch concluded.
Earlier, the the US Senate approved the $1.5 trillion tax bill, which includes permanent tax breaks for corporations and temporary tax cuts for individuals, by a final vote of 51-48.
The bill lowers the top individual tax rate from 39.6 percent to 37 percent and slashes the corporate tax rate to 21 percent, a dramatic fall from its current rate of 35 percent.
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