Saudi Arabia's Oil Minister al-Naimi

U.S. shale drilling may be slowing, but not fast enough for OPEC to change policy at its June meeting or to prevent oil prices maybe falling more, in the view of the group?s Gulf members.

Actual oil output from the United States could prove harder to beat back, sources in the Gulf say after poring over the latest data with top consultants.

The message is, do not underestimate the ability of the oil industry to adapt: there can be cost cuts, restructuring and consolidation and that would take time, the sources said.

?These two years, 2015-16, are still a discovery, everybody is talking about the economics of tight oil but nobody is talking with certainty? you have to wait and see,? said a source from a Gulf OPEC producer.

At its last meeting in November, OPEC kingpin Saudi Arabia persuaded fellow members to keep production unchanged, accelerating the sharp oil price drop to a low around $45.

Oil Minister Ali al-Naimi has made it clear Riyadh will not cut output to prop up oil markets at the cost of market share.

OPEC will have no choice but to hold its course, Kuwait?s oil minister said on Thursday, reiterating the view from the Gulf Arab state that the group is likely to keep things as they are in June.

The number of drilling rigs in the United States has fallen steeply in recent months and production growth slowed, although many U.S. producers argue that lower prices will bring efficiency gains and output will not fall so steeply.

The Gulf OPEC side believes the wait may stretch into 2016, but analysts say low prices are a potent force.

?Lower prices work. They undermine supply growth and spur demand. Yes, year-on-year there is still a lot of growth in U.S. oil output but month-on-month it has stopped,? said Gary Ross, executive chairman and founder of New York oil consultancy PIRA.

?You have got to give it time and I believe the Saudis will be prepared to wait until the price magic works. And it will work.?

RESILIENT SHALE

Advertisements

Send your news stories to [email protected] and via WhatsApp on +233 234-972-832 

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.