This week, Saudi oil minister Ali Al-Naimi will for the first time face the victims of his decision to keep oil pumps flowing despite a global glut: US shale oil producers struggling to survive the worst price crash in years.While soaring US shale output brought on by the hydraulic fracturing revolution contributed to oversupply, many blame the 70-per-cent price collapse in the past 20 months primarily on Naimi, seen as the oil market’s most influential policymaker.During his keynote on Tuesday at the annual IHS CERAWeek conference in Houston, Naimi will be addressing US wildcatters and executives who are stuck in a zero sum game.”OPEC, instead of cutting production, they increased production, and that’s the predicament we’re in right now,” Bill Thomas, chief executive of EOG Resources Inc (EOG.N), one of the largest US shale oil producers, told an industry conference last week, referring to 2015.It will be Naimi’s first public appearance in the United States since Saudi Arabia led the Organisation of Petroleum Exporting Countries’ shock decision in November 2014 to keep heavily pumping oil even though mounting oversupply was already sending prices into free-fall.Naimi has said this was not an attempt to target any specific countries or companies, merely an effort to protect the kingdom’s market share against fast-growing, higher-cost producers.
It just so happens that US shale was the biggest new oil frontier in the world, with much higher costs than cheap Saudi crude that can be produced for a few dollars a barrel.”I’d just like to hear it from him,” said Alex Mills, president of the Texas Alliance of Energy Producers. “I think it should be something of concern to our leaders in Texas and in Washington,” if in fact his aim is to push aside US shale producers, Mills said.Last week’s surprise agreement by Saudi Arabia, Qatar, Russia and Venezuela to freeze oil output at January levels – near record highs – did not offer much solace and the global benchmark Brent crude LCOc1 ended the week lower at $33 a barrel and US crude futures CLc1 ended unchanged at just below $30.Prices fell sharply on Tuesday after Iran, the main hurdle to any production control in its zeal to recapture market share lost to sanctions, welcomed the plan without commitment. Iraq was also non-committal.Many US industry executives understand that all is fair in love, war and the oil market, but “the Saudis have probably overplayed their hand,” said Bruce Vincent, former president of Houston-based shale oil producer Swift Energy, which filed for bankruptcy late last year.
source:Reuters
