Glut must be dealt with by everyone

houston — The Organisation of the Petroleum Exporting Countries is moving to bring US shale producers and hedge funds into widening talks about how best to tame a global oil glut.

The group held unprecedented talks with fund executives and held meetings with shale producers, including Pioneer Natural Resources and ConocoPhillips.

The introductory discussions were the first bilateral meetings with shale producers and investment funds, Opec Secretary-General Mohammed Barkindo said at the CERAWeek energy conference in Houston.

The two have become important players in adding production to a world awash in crude oil. Cheap financing for newer producers has forced majors to turn their focus from big, long-term projects to those that can generate quick cash for their investors.

Last November, the Opec took initial steps to widen its market reach as it sought to end a two-year price war, striking a historic agreement with 13 non-member countries, including such major oil producing nations as Russia, Kazakhstan and Mexico.

Saudi Arabia Oil Minister Khalid Al Falih separately told a group of oil industry executives at the conference that the November pact set a new “cooperative framework” for the Opec to address short-term market turmoil.

“All of us realise that such an expanded network of producers with a larger share of global production is the only way to achieve a constructive, stable market for all,” he said. The discussions with hedge funds come as their role in US energy has grown. Funds have become major equity financiers of young US oil firms and in some cases owners of production assets in expanding basins including the Permian in West Texas.

The outreach is expected to continue. Any decision to extend the Opec-led production cuts beyond June would have to include the continued participation by the nonOpec countries, Barkindo said.

“I think we have broken the ice between ourselves and the industry, particularly the tight oil producers and the hedge funds who have become major players in the oil market,” he said in remarks on the conference sidelines.

Opec plans to hold an event to consider the impact of oil futures on physical crude markets, Barkindo said, without providing details.

Scott Sheffield, executive chairman of Pioneer, said the meeting between shale producers and Opec officials reflects an extraordinary change in the relationship between the two groups, whose interests sometimes are in conflict. —