OPEC, U.S. Shale Producers Meet Over Output, Price

The secretariat of the Organisation of Petroleum Exporting Countries (OPEC), for some hours on Sunday met 20 or more of America’s top shale producers to agree on the need for mutually beneficial but rare off-the-record chat about the future of oil- particularly to control production output and price.
Bloomberg, on Tuesday reported that Nigerian-born Mohammed Barkindo, secretary-general of the OPEC, dined with the shale executives including Scott Sheffield of Pioneer Natural Resources, John Hess of Hess Corp., Robert Lawler of Chesapeake Energy and Tim Leach of Concho Resources, according to people who attended the event and asked not to be named because it was private.
As expected, both sides at the dinner at a restaurant in downtown Houston, Texas, agreed in principle on the need to balance the market and lower inventories, Bloomberg reported, quoting sources at the meeting. But while the shale producers signaled they weren’t ready to give up on the growth they see ahead, OPEC indicated it wants higher prices, even if it means enriching the shale companies, they said.
For OPEC, U.S. shale producers are a new source of competition, able to respond faster to price signals than traditional suppliers. Since May they have almost doubled the number of active oil-drilling rigs in the country, helping lift the nation’s production above 9MMbpd for the first time in almost a year.
The IEA forecast they’ll ramp up output by 1.4 MMbpd from now until 2022 even if oil prices remain at current levels below $60/bbl.
“We are witnessing the start of a second wave of U.S. supply growth,” Fatih Birol, the IEA’s executive director, told Bloomberg News in an interview in Houston on Monday.
For shale companies, OPEC can determine whether they enjoy high enough oil prices to make money, as is the case today, or they face losses and even bankruptcy, as many did in 2015 and early 2016 when WTI, fell to a 12-year low of less than $30/bbl.
“They are asking questions, the same questions we are asking. We are all learning, because this is new in the world of oil,” Barkindo told reporters on Sunday night.