Oil: A severe reduction in US shale supply needs $30 oil - BAML

According to analysts at BofA Merrill Lynch, last OPEC cut has been a different matter, as demand has been very strong for the past two years.

Key Quotes

“As we have learned, US shale oil technology is a game changer. It is extremely sensitive to prices, and shale output tracks WTI with a 9 to 12 month lag.  So just as soon as OPEC cuts have started to impact the term structure of oil prices, US shale production has taken off in a very meaningful way. Tit-for-tat. Moreover, shale producers have repaired their balance sheets, consciously reducing leverage in the past 18 months. A combination of improving technology and balance sheet repair is very powerful. It means American shale producers are now prepared to live within cash flow and adjust capex as needed. So next time US shale output has to swing down on a global oil demand collapse, prices may have to drop sharply to $30/bbl or below.”