OPEC decision throws the market balance into crisis most acutely in H1-2015 when seasonal demand is weak, according to report by Deutsche Bank.“In our view today’s decision throws the market balance into crisis most acutely in H1-2015 when seasonal demand is weak, and perhaps before US tight oil producers have had a chance to make any major adjustment to activity levels,” DB said.

DB estimates that sustained pricing at $60/bbl WTI is the level which would trigger a material shift in the trajectory of US production growth.

However, producer hedging and the length of drilling contracts may retard the onset of lower drilling activity, thus lengthening the time required for supply to adjust.

Thursday's OPEC conference ended in the most dovish way imaginable, apart from an increase in production quotas. Member countries reaffirmed the aggregate production allocation of 30 mmb/d, with the assertion that compliance has been acceptable.

In all fairness, 2014 OPEC production has averaged 30.2 mmb/d which is relatively tight in comparison to past excesses over 2009-12.

Less certain is whether the decision endorses the October production level of 30.6 mmb/d. In the below pro forma analysis we assume OPEC production at 30.2 mmb/d in 2015, the report added.
Source: Deutsche Bank