(The opinions expressed here are those of the author, a

columnist for Reuters.)

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Oil prices have held in a $60 to $70 range for months

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Trump triggered Russia sanctions when prices were at lower

end

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But this range could extend an oversupply for longer

By Ron Bousso

LONDON, Nov 10 (Reuters) - Oil prices have oscillated in

a relatively narrow range of $60 to $70 a barrel in recent

months, reflecting both warnings over rising oil supplies as

well as concerns about trade wars and geopolitical conflicts.

While this may be a sweet spot for U.S. President Donald

Trump, it is a 'no man's land' for oil producers.

Crude prices hit the low end of this range in mid-October,

enabling Trump on October 22 to follow through on his threat to

slap severe sanctions on Russia's two oil giants Lukoil

and Rosneft, which account for around 5% of

global output.

Trump likely calculated that the escalation of the economic

warfare on Moscow would not lead to severe disruption and price

spikes since the oil market is today oversupplied.

At the same time, with prices in the current range, the

United States' status as the world's top oil producer remains

unchallenged. The U.S. Energy Information Administration in

October boosted its forecasts for 2025 production by 100,000

barrels per day to 13.5 million bpd, while also increasing next

year's output forecasts.

CONFUSION REIGNS ON MARKET DIRECTION

Is the U.S. president right to be optimistic that prices

will remain rangebound?

It depends on who you ask.

The International Energy Agency is forecasting a huge

oversupply of 4 million bpd next year, nearly 4% of global

demand, which could crush prices, forcing many producers to

scale back output dramatically.

But the world's energy leaders do not seem overly worried.

At an industry gathering in Abu Dhabi last week, heads of

oil trading houses predicted that Brent oil prices would stay

within the $60 to $70 range next year, with some suggesting that

the feared oversupply may not be as large as the IEA predicts.

That is partly because of disagreements about demand. While

the IEA expects consumption to grow by 700,000 bpd this year,

OPEC analysts peg growth at nearly double that rate at 1.3

million bpd. China's huge stockpiling this year, for which

Beijing does not provide any data, has further confused the

demand picture.

Meanwhile, lower visibility into a large portion of the oil

market due to expanded use of sanctions-busting tankers to

transport Russian, Iranian and Venezuelan oil has also blurred

the assessment of supply.

The OPEC+ alliance is clearly hedging its bets. It called

last week for a modest increase in its production target in

December of 137,000 bpd followed by a pause through the first

quarter of next year.

MAJORS MUDDLE THROUGH

Most Western oil majors are signalling that they don't

expect to see a dramatic shift in prices in the near future.

Many big U.S. shale oil producers, including Exxon Mobil ( XOM )

, Chevron ( CVX ) and ConocoPhillips ( COP ), plan to

continue growing output in the coming years.

Exxon, the largest U.S. oil producer, last month increased

its 2025 production forecast in the oil-rich Permian basin by

100,000 barrels of oil equivalent per day to 1.6 million boed,

while maintaining 2027 output at 2 million boed.

Chevron ( CVX ) also grew its Permian output in the third quarter

and plans to maintain output at 1 million boed for years.

These firms have in recent years made deep cost cuts to

allow them to generate profits and pay dividends even with crude

prices around $60 a barrel. In fact, oil majors are even

signalling they will be able to maintain share repurchases at

current prices, though they may need to tap debt markets to do

so.

SWEET SPOT OR 'NO MAN's LAND'?

Does this mean that everyone will be happy if prices remain

within today's narrow band? Hardly.

Many OPEC producers require oil prices far above the current

range in order to balance their national finances. Saudi

Arabia's fiscal breakeven stands at $92 a barrel, according to

the International Monetary Fund.

But the current price range is also problematic for the oil

market as a whole. Until prices breach the floor of the current

range, the supply-demand balance will remain in limbo, at risk

of a violent correction if OPEC's optimistic demand forecasts do

not pan out.

That's because swing producers, particularly U.S. shale

drillers, will not be forced to sharply scale back production

unless prices fall below $60 per barrel for a significant period

of time.

Existing wells in the big shale basins can generate profit

at U.S. oil prices of $26 to $45 a barrel, according to a recent

survey by the Federal Reserve Bank of Dallas.

Moreover, companies will drill new wells at between $61 and

$70 a barrel, according to the survey. And big offshore projects

can generate profits at far lower prices of between $40 to $50 a

barrel.

If these producers keep production steady, the potential

oversupply risk will only continue to grow.

To be sure, there are signs of a slowdown in drilling

activity in U.S. shale. The number of onshore rigs in operation

has dropped by around 10% so far this year, according to data

from services company Baker Hughes.

But if the IEA's oversupply scenario materializes, a much

bigger correction will be needed. Oil would likely need to drop

to $50 a barrel for an extended period to force producers to

sharply slow drilling activity and allow supply and demand to

rebalance.

President Trump - and U.S. consumers - might be fine with

that, but U.S. producers and many OPEC members certainly would

not.

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(Ron Bousso; Editing by Joe Bavier)