Not even OPEC saw the oil crash coming

The expected resurgence of U.S. shale oil production will cap a recovery in the coming years in the price of oil, which is expected to reach US$80 per barrel by 2020, IEA Director Fatih Birol said at a news conference in Houston, Texas.

Saudi Arabia’s Minister of Petroleum & Mineral Resources Ali Al-Naimi speaks at the annual IHS CERAWeek global energy conference Tuesday, Feb. 23, 2016, in Houston.

“We are not banking on cuts because there is less trust that countries are going to deliver even if they promise”, Al-Naimi said on Tuesday.

Al-Naimi echoed what many other speakers had already insisted: Today’s low prices are part of a cycle.

Prices that hovered over $US100 per barrel for years encouraged inefficient producers to grow output, and those barrels will have to leave the market first, he said.

Global production exceeded demand by as much as 2 million barrels per day a year ago.

Efforts by Nigeria and other OPEC members to achieve greater price stability “are expected to be high on the agenda of discussions between President Buhari and the Saudi monarch”, the statement said.

So “after a few months of monitoring the production freeze, in which they also have a better handle on US shale production declines”, OPEC can then meet to see if they can “establish a price-supporting quota”, said James Williams, energy economist at WTRG Economics.

After the API report, Brent sank further to $32.92 at 4:47 EST, and US crude fell to $31.30 a barrel. “Cutting low-priced production to subsidize higher-cost supplies only delays an inevitable reckoning”, he said.

The senior oil executive said OPEC continues to remain relevant in these tough market conditions.

Oil prices have cratered more than 70 percent since mid-2014 as near-record oil production by OPEC members, Russia, the United States and other producing nations created a massive crude glut.

“I don’t know how we are going to live together”, he said of the once thriving shale developments. “There are multiple sources of supply with no sense of scarcity because technology is opening so many new opportunities, of these, the most important is the potential growth of oil produced from shale rock”, the newspaper noted.

“The market has had a growing realization that the production freeze we’ve talked about over the past week will do virtually nothing to ease the ongoing oversupply”, said Fraser.

Iran’s oil minister Bijan Zangeneh on Tuesday called the Saudi Arabia-led idea for countries to freeze production a “joke”, according to Iranian state broadcaster Press TV.