Oil market at risk from rising WTI and shale breakeven spread - National Bank of Canada

National Bank of Canada Economics and Strategy desk says the rising spread between WTI and shale breakeven prices could derail oil market rebalancing.

Key quotes

Demand/supply fundamentals are currently favorable to oil and could indeed lift prices further over the near term. But the higher WTI goes, the more brutal the subsequent decline is likely to be.

WTI oil is now high enough above break-even prices for the marginal producer (i.e. shale oil players) to rekindle output from shale oil.

The last time there was such a spread between WTI and shale breakeven prices, the global oil market turned, in the space of just a few quarters, from excess demand to excess supply.