Saudi Arabia will remain top oil exporter, but ‘cannot ignore’ shale revolution, says IEA

The IEA's Fatih Birol said: ‘In the shale-revolution world, no country is an island. The established producers’ strategy in terms of cuts and limits will have to be reconsidered in light of the huge growth in shale.’ (Reuters)
Updated 05 March 2018
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Saudi Arabia will remain top oil exporter, but ‘cannot ignore’ shale revolution, says IEA

HOUSTON: Saudi Arabia will remain the “most important oil exporting country for many years to come,” but its strategy and that of the rest of the OPEC countries will have to be reconsidered in light of the revolution in the energy world as a result of the boom in US shale production.
That was the message from Fatih Birol, the executive director of the International Energy Agency (IEA) at the CERAWeek by IHS Markit meeting in Houston, Texas.
Birol, who unveiled the IEA’s global oil report at the event, said Saudi Arabia and other “established producers” had limited scope to affect global energy trends over the next five years, and would have to rethink their strategy to take account of the new energy environment.
“In the shale-revolution world, no country is an island. The established producers’ strategy in terms of cuts and limits will have to be reconsidered in light of the huge growth in shale,” he said.
Birol was asked if Saudi Arabia should try to coordinate strategy with shale producers in light of the US boom, with speculation in Houston that OPEC producers were in talks with their American rivals.
“Saudi Arabia will remain the largest and most important exporter, but is not the biggest producer, and there is an important difference. The market has its own dynamics and companies always will look to increase their financial returns. From that angle, the shale producers will continue to grow regardless of any agreement Saudi Arabia might reach with shale producers. That cannot ignore the growth coming from shale,” he said.
The IEA oil report forecast growing demand for crude over the next five years, but also predicted that US shale was on the brink of a “major second wave” that would see American producers supplying more than half of the increased global demand expected to come mainly from China and India. “America will put the stamp on global oil market developments over the next five years,” he said.
The IEA said that its bullish forecasts for shale output were conservative. “We will revise upward if the oil price goes much above $60,” Birol said.
However, Neil Atkinson, head of the IHS oil market team, said it was unlikely prices would head upward significantly in the near future. “It’s difficult to see how prices can move upward much, apart from geopolitical reasons,” he said.


OPEC oil ministers gather to discuss production increase

Updated 19 June 2018
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OPEC oil ministers gather to discuss production increase

  • Analysts expect the group to discuss an increase in production of about 1 million barrels a day
  • The officials were arriving in Vienna ahead of the official meeting Friday

VIENNA: The oil ministers of the OPEC cartel were gathering Tuesday to discuss this week whether to increase production of crude and help limit a rise in global energy prices.
The officials were arriving in Vienna ahead of the official meeting Friday, when they will also confer with Russia, a non-OPEC country that since late 2016 has cooperated with the cartel to limit production.
Analysts expect the group to discuss an increase in production of about 1 million barrels a day, ending the output cut agreed on in 2016.
The cut has since then pushed up the price of crude oil by about 50 percent. The US benchmark in May hit its highest level in three and half years, at $72.35 a barrel.
Upon arriving, the energy minister of the United Arab Emirates, Suhail Al Mazrouei, said: “It’s going to be hopefully a good meeting. We look forward to having this gathering with OPEC and non-OPEC.”
The 14 countries in the Organization of the Petroleum Exporting Countries make more money with higher prices, but are mindful of the fact that more expensive crude can encourage a shift to renewable resources and hurt demand.
“Consumers as well as businesses will be hoping that this week’s OPEC meeting succeeds in keeping a lid on prices, and in so doing calling a halt to a period which has seen a steady rise in fuel costs,” said Michael Hewson, chief market analyst at CMC Markets UK
The rise in the cost of oil has been a key factor in driving up consumer price inflation in major economies like the US and Europe in recent months.
Already US President Donald Trump has called on OPEC to cut production, tweeting in April and again this month that “OPEC is at it again” by allowing oil prices to rise.
Within OPEC, an increase in output will not affect all countries equally. While Saudi Arabia, the cartel’s biggest producer, is seen to be open to a rise in production, other countries cannot afford to do so. Those include Iran and Venezuela, whose industries are stymied either by international sanctions or domestic turmoil. Iran is a fierce regional rival to Saudi Arabia, meaning the OPEC deal could also influence the geopolitics in the Middle East.