No plan to drive US shale out of business, says OPEC chief
Comments come ahead of market monitoring meeting as global body reiterates commitment to production cuts
Saudi Capital Market Authority chairman
FAST FACT
OPEC Secretary General Mohammad Barkindo said there was no aim to drive US shale oil producers out of business, after the price of US barrels briefly turned negative in April.
He was speaking in a CERAWeek interview ahead of next week’s OPEC+ market monitoring panel meeting. The Organization of the Petroleum Exporting Countries (OPEC) and other exporters including Russia are collectively known as OPEC+. In April, the group agreed the single largest output cut in history in response to plunging oil prices that followed in the wake of the coronavirus pandemic.
“There is no objective whatsoever from us as a group or as individual countries to drive US shale production out of business,” said Barkindo. “No. It is not in our interest to do that. It is not in the interest of the global industry to do that. Without the US shale probably, we could have entered into a worse crisis than we are seeing in this pandemic.”
It costs more for US shale drillers to produce oil than their conventional counterparts in OPEC, so the slide in prices this year has had a devastating impact on that industry. The situation reached crisis point on April 21 when storage space at Cushing in Oklahoma, the main delivery point for US light sweet crude oil, became full, forcing prices to turn negative for the first time ever. Barkindo said that OPEC had established a line of communication with US independent producers and thanked both the US and the G20 for helping to “restore communication” between OPEC+ producers.
The latest production cuts deal among OPEC+ exporters has been hampered by some countries, including Iraq and Nigeria, failing to meet their commitments. That had led to friction within the group in recent weeks.
The OPEC secretary general said that measures had been put in place to ensure that if producers fell short on their commitment to production cuts in one month, they could compensate for that shortfall in another month. “Countries who have some difficulty in one month and for some technical or operational reasons were only able to (comply) 90 percent so we have introduced this element where they can compensate for that 10 percent in the subsequent months. We think this is very fair, it’s equitable. It also gives the market the guidance that it requires that we are very solid on these numbers. These numbers are sacrosanct.”
Oil prices dipped on Thursday amid concerns about the renewed spread of the coronavirus in the US and other countries.
Brent crude was down about 0.2 percent to $43.20 in early afternoon trade in London while US WTI also dipped by about 0.7 percent to $40.59.