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U.S. oil this month dropped below $50 a barrel for the first time this year as the nation’s near-record crude stockpiles and increasing production weighed on the output reductions by the Organization of Petroleum Exporting Countries and its allies. While OPEC won’t decide until May whether to prolong the curbs, energy ministers including Russia’s Alexander Novak will meet this weekend in Kuwait to discuss the deal’s progress.

U.S. drillers boosted the rig count by 14 to 631 last week, data from Baker Hughes showed. They have added 106 machines to fields this year. The nation’s crude output has climbed to 9.1 million barrels a day, the most since February last year, according to the Energy Information Administration.

Shale fracking—the business of getting oil and gas out of rocks by blasting them with water and sand—is booming once again after the crash of 2014-16. Exploration and production (E&P) companies are about to go on an investment spree. Demand is soaring for the industry’s raw materials: sand, other people’s money, roughnecks and ice-cold beer.

The business has burned up cash for 34 of the last 40 quarters, according to figures on the top 60 listed E&P firms collected by Bloomberg, a data provider. With the exception of airlines, Chinese state enterprises and Silicon Valley unicorns—private firms valued at more than $1bn—shale firms are on an unparalleled money-losing streak. About $11bn was torched in the latest quarter, as capital expenditures exceeded cashflows. The cash-burn rate may well rise again this year.

Khalid al-Falih, Saudi’s energy minister, warned of “irrational exuberance” on March 7th during an energy-industry conference in Houston.

When oil prices halved in just 16 weeks starting in late 2014, panic hit Texas, followed—for a while—by grim austerity. The number of drilling rigs in America dropped by 68% from peak to trough. Companies slashed investment. Over 100 firms went bankrupt, defaulting on at least $70bn of debt. Shale’s retrenchment helped to stabilise the global oil price. Production in the lower 48 states (ie, excluding Alaska and Hawaii), and excluding federal waters in the Gulf of Mexico, has dropped by 15% over the past 21 months, equivalent to 1m bpd, or 1% of global output.

The industry has also lifted productivity. Drilling is faster, more selective and more accurate, and leakage rates are lower. Wells are being designed to penetrate multiple layers of oil that are stacked on top of each other.

But the fact that the industry makes huge accounting losses has not changed. It has burned up cash whether the oil price was at $100, as in 2014, or at about $50, as it was during the past three months. The biggest 60 firms in aggregate have used up $9bn per quarter on average for the past five years. As a result the industry has barely improved its finances despite raising $70bn of equity since 2014. Much of the new money got swallowed up by losses, so total debt remains high, at just over $200bn.

For the ten largest listed E&P firms, aggregate cash operating costs per barrel fell by $13 between 2014 and 2016; not enough to offset a $50 drop in the oil price. Because shale-energy fields run out far faster than traditional ones, firms must reinvest heavily to keep production flat.

There are two theories for why this is happening. One is that the way in which executives are paid, together with lenders’ incentives, means that Houston is always vulnerable to investment mania. Not one of the ten biggest E&P firms, for example, puts significant emphasis in its pay scheme on how much return on capital it produces. Low interest rates make it easy for shale firms to borrow, and fee-hungry banks cheer on the spectacle. But the only way that the mania will end well is if oil prices rise sharply, bailing out the industry, or if E&P firms are bought by bigger energy firms. That is possible, but companies such as Exxon and Shell are too seasoned to pay a lot for small, unprofitable firms.

The second explanation is oil executives’ belief in increased output from the Permian, and higher productivity. Most E&P firms reckon they can expand production at an annual rate of 10-20% over the next few years. But to justify their market values, and make an adequate return on their cumulative capital invested, listed E&P firms would over time need to make about $60bn of free cashflow each year. Assuming that both energy prices and capital spending stay flat, that would require them roughly to double production from current levels.

The trouble is that this is a circular argument. If achieved across the whole shale industry it would mean that output would be twice as high as it is now, leading to a 5% increase in global supply, which might in turn lower the oil price. There is something heroic—and baffling—about America’s shale firms. They are the marginal producer in a cyclical industry, and that is usually an unpleasant place to be. The oil bulls of Houston have yet to prove that they can pump oil and create value at the same time.

Each OPEC nation has a specific domestic demand for oil based on population numbers and the share of oil and petroleum products in the energy mix and electricity generation. Each member has unique buyers of their crude, along with differing agendas in keeping and/or growing market shares in various corners of the world.

OPEC’s playbook currently is 1) urging full compliance from all signatories to the deal, 2) using Saudis to signal they may be fed up with doing the extra heavy lifting for rogue members, and 3) talking prices up from time to time with messages that the supply-cut deal may need to be extended.

The cartel is a diverse group of nations with various bilateral, trilateral and bloc relations among them. OPEC members rarely act in full concert, and seldom keep production-cut pledges. Their game now is playing the market with the possible extension of the cuts beyond June, and they have time until May to try to talk prices up.

If the cartel doesn’t extend the deal, the glut may not clear soon, further depressing oil prices and straining the already stretched OPEC producers’ budgets. If they decide to extend the deal, they risk losing market share and part of their power to sway oil markets and prices.

During the week ended March 14, hedge funds decreased their net-long position, or the difference between bets on a price increase and wagers on a decline, by 23 percent to 288,774, the largest decline on record and the lowest level since December. WTI tumbled 10 percent during the period. Longs fell 8.9 percent to the lowest level since early January, and shorts doubled from the prior week to the highest since November.

It’s sort of a negative feedback loop, where money managers were selling because the price was falling, and the price was falling in part because money managers were selling

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Saudi Arabia is ready to extend the cuts into the second half if supplies stay above the five-year average, Energy Minister Khalid Al-Falih said. Russian Energy Minister Alexander Novak countered it was too early to discuss an extension. An OPEC panel is scheduled to meet this month to review compliance with the current deal.

If you make it through this next OPEC compliance meeting and we don’t have further jawboning by the Saudis and Russia, or more compliance, I think that you have room to grow on the short side, which is worrisome

There’s still hope OPEC will continue its efforts to reduce the global glut. Deutsche Bank predicted Thursday that the group will extend the cuts not only through the end of this year, but also through the end of 2018. Citigroup said OPEC’s output reductions aimed at easing the glut are “real” and already are cleaning up the market.

the downside risk to oil prices has not gone away. In fact, with market sentiment starting to falter, a growing number of investors are abandoning their record bullish bets on oil, which could send prices down further.

For the week ending on March 14, hedge funds slashed their net-long positions by a staggering 23 percent, a record decline. That corresponded with a roughly 10 percent fall in oil prices.

“It’s sort of a negative feedback loop, where money managers were selling because the price was falling, and the price was falling in part because money managers were selling,”

At the same time, the liquidation of the unsustainable build-up in net-long positions takes away some of the harshness of the downside risk. Sort of like a safety valve that has relieved some pressure, the reduction in bullish bets means that there will be less of a danger of another sharp correction in prices stemming from speculative moves. Short sellers are using up their firepower right now.

In other words, the mid-$50s appeared to be a stable range for the past few months, but if the market is to trade narrowly and steadily again, a more appropriate range given today’s fundamental could arguably be the upper-$40s.

Libya’s ability to reclaim its role as a reliable supplier of crude depends on the fate of a pair of oil ports on the war-ravaged country’s coast. Es Sider and Ras Lanuf have changed hands twice this month as rival military groups have battled over them. The two ports hold almost half of Libya’s capacity to export oil from onshore terminals, and the country’s ability to sell abroad affects prices globally.

Es Sider and Ras Lanuf are especially valuable because they are the main outlets for crude pumped at fields in Libya’s interior. When operating normally, Es Sider can export as much as 340,000 barrels a day, while Ras Lanuf can ship 220,000 barrels a day. Located in Libya’s so-called Oil Crescent along its central Mediterranean coast, the terminals together account for 47 percent of the total capacity of the country’s onshore oil ports. Whoever controls them has a grip on Libya’s most important source of income.

The National Oil Corporation reopened the terminals in September, but they stopped shipping cargoes abroad this month because of the latest hostilities. The export halts have had a knock-on effect on oil production: storage tanks at the terminals become full, pipelines feeding them back up with crude, and fields that produce the oil must curtail output

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When the latest fighting broke out March 3, causing both ports to close, the price of benchmark Brent crude jumped 82 cents a barrel, or 1.5 percent. The ports play a larger role in oil prices in that if they can resume exports and remain in operation, they can help Libya, which possesses Africa’s largest oil reserves, achieve its goal of significantly increasing output. The country is currently producing 646,000 barrels of oil a day, according to the NOC, and hopes to reach 1.2 million barrels a day by August.

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Banks’ commodities revenues have slumped from their peak in 2008. More regulatory scrutiny, curbs on proprietary trading and reduced investment by their hedge-fund clients and other large traders have hurt profits. That forced some lenders to reduce or cut their exposure to commodities completely.