Brent crude rose to a three-year high of $70 a barrel last week, but there are questions about the rally’s resilience as higher oil prices threaten to unleash a new wave of US shale output. “The higher the prices go, the harder shale producers pump,” Tamas Varga at London-based broker PVM, said. He added, an “overdue correction could be under way”. Oil prices have been rising since late June, supported by supply cuts led by Opec producers and allies outside of the cartel such as Russia, which helped to curb excess stockpiles.
Brent, the international oil benchmark, on Thursday hit the highest level since December 2014, spurring concern that higher prices will attract increased US shale production, undermining efforts by global producers to cut supplies and triggering renewed pressure on prices. Bijan Zanganeh, Iran’s oil minister, said last week that some Opec members were not keen on increased prices, especially of more than $60, while the US Department of Energy forecast record levels of production this year, with output escalating to 11m barrels a day in 2019 up almost 20 per cent from last year.