<p>Last December, OPEC and allied oil producers agreed to cut production by 1.8 million bpd in a desperate attempt to shrink global supply and rebalance the market. ;</p>
<p>The effort began on January 1st, 2017 and was scheduled to last for 6 months. As OPEC&rsquo;s biggest producer, Saudi Arabia agreed to cut production by a staggering 486,000 barrels per day (about 5% of its total production).</p>
<p>OPEC and its allies will reconvene on May 25th. We expect they will announce an extension of the original deal.</p>
<p>&ldquo;Based on consultations that I&rsquo;ve had with participating members, I am confident the agreement will be extended into the second half of the year and possibly beyond,&rdquo; said Saudi Energy Minister Khalid al-Falih.</p>
<p>OPEC is also begging other oil producers to cut production in order to help rebalance the market and drive prices up. ;</p>
<p>Balancing the market will &ldquo;require the collective efforts of all oil producers,&rdquo; stated OPEC in its monthly report. This should be done &ldquo;not only for the benefit of the individual countries, but also for the general prosperity of the world economy.&rdquo; ;</p>
<p>OPEC blames the oversupply on the US shale industry, which has continued to increase production in spite of low prices. ;</p>
<p>American shale producers were not part of last year&rsquo;s deal, and their increasing production levels ;have made it impossible for OPEC to keep prices between $50 and $60 per barrel.  ;</p>
<p>US producers, who were forced to become more efficient after OPEC ramped up production in 2014 in an attempt to drive ;higher-cost producers out of business, can continue to make money as long as prices stay higher than $40 per barrel. ;</p>
<p>&ldquo;Oil prices have gained support but global inventories remain high,&rdquo; reports <em>Reuters</em>. In recent months, prices have hovered between $47 and $54.</p>
<p>&ldquo;I think [OPEC] are now acutely aware that they don&rsquo;t have the kind of influence they used to have 10 years ago, and that shale is now the swing producer in the market,&rdquo; says Capital Economics commodities economist Tom Pugh. ;</p>
<p>In addition to extended production cuts by producers in the Middle East, here are some more factors that could influence the oil market in the near future:</p>
<p>&bull; Growing Chinese economy ;</p>
<p>&bull; India&rsquo;s decision to cut oil imports from Iran by 25%</p>
<p>&bull; President Trump&rsquo;s reach for energy independence ;</p>
<p>&bull; President Trump&rsquo;s policies on drilling and fracking ;</p>
<p><strong>Author&#8217;s Note:</strong> Saudi Arabia and the OPEC nations tried to squeeze US shale out of the market, but they failed. Now they face competitors with more efficient technology and reduced production costs. ;</p>
<p>Saudi Arabia has very little in the way of productivity other than oil production. Like Venezuela, SA could be another chilling example of a socialist economy that eventually destroys itself.</p>