U.S. Shale Likely to Claim Victory in The Form of OPEC Cutback Deal Collapsing Next Year: Analysts

It's all but official: analysts on Thursday conceded that the capabilities of U.S. shale are boundless, have fundamentally changed the crude market and will likely cause the Organization of the Petroleum Exporting Countries' (OPEC) cutback deal to collapse next year.

Edward Bell, oil analyst at Emirates NBD PJSC, told Bloomberg, "There appears to be no topside limit to production in the U.S., or at least it hasn't been discovered yet.

"The persistent rise in the drilling rig count suggests the market will need to withstand more, not less, U.S. oil in the near term."

Meanwhile, Ian Reid, head of European oil and gas research at Macquarie, told CNBC's Street Signs that OPEC members are a "disparate bunch" and that "We actually see this OPEC agreement breaking up towards the middle of next year; in that case, we're going to see a huge amount of extra oil on the market next year."

Reid went on to note that the volume of U.S. shale "has risen quicker and more sustainably than most people were expecting even a few months ago…that knocks out pretty much all of what OPEC can do," and he added that Macquarie doesn't expect much of a price recovery in 2019.

Ewen Cameron Watt, senior director at BlackRock, told Street Signs that competition from shale drillers is now more formidable than ever, and "They have managed to raise a lot more capital in the last 12-18 months so they can sweat this out for a bit longer."

From an analytical perspective at least, the focus on OPEC's cutback agreement has shifted drastically from the hope not to long ago that an extension of the cuts would be accompanied by a deepening of cuts, in order to combat rising production not only from the U.S. but from OPEC members such as Nigeria, Iraq, and Libya, who are defying the cutbacks and pumping all-out.

Jens Pedersen, an analyst at Danske Bank A/S, said, "The market is probably hoping OPEC will do more, but not expecting it -- otherwise oil prices wouldn't be falling."

Hasan Qabazard, the former head of research for OPEC, told Bloomberg, "Deepening the cuts is one good option" but "this will come at the expense of OPEC's market share.

"Do they want to lose share? I don't think so, because many countries have invested in raising capacity recently."

Bloomberg concluded that as we enter the bear market, Saudi Arabia's pledge to do what it takes to stabilize prices "looks like not much at all."

Still, it's questionable if U.S. shale is as invulnerable as some observers suggest, and this week's market losses have caused speculation that even the most resourceful producers will start to feel the crunch the closer crude reaches the $40 mark.