Crude Glut Belies Risk From OPEC's Dwindling Output Cushion

Brent crude, the benchmark for more than half the world’s oil, traded at $46.27 a barrel on the London-based ICE Futures Europe exchange by 12:41 p.m. Singapore time. West Texas Intermediate, the U.S. marker, was at $43.60 in New York. Both were at more than $105 a barrel in mid-2014.

Capacity Squeeze

“The low oil price is doing the work of squeezing out that excess capacity in every link in the supply chain,” Kleinman said. “The problem is that it’s setting us up for a bullish oil market because we’re just not sanctioning any oil projects from down here.”

The spending cuts extend to strategies such as in-fill drilling and enhanced oil recovery techniques that can extend life and slow production declines in older fields. Questions also remain about whether the rush to produce as much oil as possible now might lead to steeper output decreases in the future, said Eirik Waerness, chief economist for Norway’s Statoil SA.

“What is really uncertain is the slightly longer-term impact of all the cost-cutting that is going on now,” Waerness said in an interview in Singapore. “We’ve done everything we can to increase efficiency, drill as efficiently as possible and increase our recovery rates, and you can’t do that for ever.”

To contact the reporters on this story: Sharon Cho in Singapore at; Serene Cheong in Singapore at; Dan Murtaugh in Singapore at To contact the editors responsible for this story: Pratish Narayanan at Dan Stets


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