Kleinwort Hambros' Kamal: Increasing US shale could tempt OPEC to oversupply market

Brent crude to remain range bound

The paradigm in the oil industry was for super-majors commissioning multi-billion dollar, decades-long projects with massive fixed-costs, such as an offshore production facility.

As long as the variable costs of production - engineers and the like - remained below current prices, production carried on. This made for relatively inelastic supply, with production at a given time having been determined years earlier.  But that model has been utterly transformed in recent years by the emergence of US shale producers. Their ability to quickly crank up supply - exploiting game-changing hydraulic fracturing technology - on short-term price signals has dramatically altered the industry. As a result of these dynamics, we believe Brent crude will largely stay betwe...