Saudi says Opec deal invigorating USA shale industry

Falih’s comment on Tuesday also appeared to mark a shift toward a grudging acceptance of the sustained US light tight oil revolution, partly due to the strength of the upstart USA industry and also the changing political winds in Washington where the new US administration is keen to unleash domestic crude oil and natural gas production to attract investment, create jobs and reduce dependence on OPEC exports. That followed new doubts over Libya’s attempts to revive its oil production after an armed faction entered two major oil ports on Friday, pushing back forces that captured and reopened the terminals in September.

Oil prices traded mixed Monday on rising USA production and the possibility for the Organization of the Petroleum Exporting Countries (OPEC) to extend cuts.

The minister also says the production agreement is reinvigorating rivals in the USA shale patch, which he says could undermine efforts to stabilize the market – a message far different than a year ago, when the Saudis warned that shale producers must cut their costs or risk bankruptcy.

Oil prices are facing headwinds from a likely U.S. Fed interest rate hike next week, a strong dollar, increasing inventory builds to record levels and rising U.S. shale oil production, he said.

The prospect of a US interest rate increase is also impacting oil prices as it would likely boost the dollar and make dollar-denominated commodities like oil more expensive for holders of other currencies.

“So, Libyan activities have increased some in the last six months, but they are still at a very small scale”, Hess said on the sidelines of the CERAWeek energy conference in Houston, Texas. He said he feels there’s “untapped potential” between the USA and Russian Federation when it comes to energy, and that Russian Federation is open to foreign investments. That increase would be driven not by Donald Trump’s pro-oil energy policy – which the IEA expected would take time to have an impact – but from continuing success for low-priced, shale oil drillers. Any decision to extend the OPEC-led production cuts beyond June would have to include the continued participation by the non-OPEC countries, Secretary General Barkindo said. OPEC plans to hold an event to consider the impact of oil futures on physical crude markets, he said, without providing details. The agency expects the USA light tight oil (LTO) production to make a strong comeback and grow by 1.4 mb/d by 2022 if prices remain around 60 dollars/bbl.

“I’ve seen more dialogue between OPEC and shale producers this year than ever before”, he said.

A deal between OPEC members and several non-member countries took effective in January, but it does not include the US oil producers. Under the November 30 OPEC agreement, Venezuela agreed to cut its production by 95,000 bpd to 1.972 million bpd beginning in January.

Opec ministers will meet to discuss the deal in May.

He also said Moscow was not mulling membership in the Organization of Petroleum Exporting Countries (OPEC) but cooperation with the oil cartel “has proved to be vital and prudent”.