Reuters learned of the unwillingness of Riyadh to extend the restriction on oil production

Photo: Nabil al-Jurani / AP

Senior officials of Saudi Arabia stated at the meeting with representatives of American oil companies that Riyadh does not intend to extend the agreement to reduce oil production

A senior Saudi officials warned American oil companies that they should not rely on the extension of OPEC imposed restrictions, through which the world price of oil went up, according to Reuters.

According to the Agency, at the meeting in Houston of the conference the Minister of energy of Saudi Arabia Khalid al-falih warned that “freebies” for shale oil producers will not. In the ensuing behind closed doors meeting with the heads of companies Anadarko, ConocoPhillips, Occidental Petroleum Corp., Pioneer Natural Resources, Newfield Exploration and EOG Resources, one of the advisors to the head of energy Ministry said that OPEC does not intend to make sacrifices for the sake of increasing shale oil production in the United States.

“He said that we and other producers of shale oil should not be confident that OPEC will extend the validity of the restrictions,” the source told Reuters on condition of anonymity.

At the end of 2016, OPEC countries agreed to limit oil production in the first half of 2017, reducing the volume daily output of the cartel by 1.2 million barrels. The decision of OPEC was joined by a number of non cartel countries, including Russia, in total they pledged to cut daily production to 558 thousand barrels.

Initially, the experts had doubts that the commitments are fulfilled, however, in January 2017, it turned out that OPEC have almost completed the semi-annual plan of reducing production. Amid reports about the price of a barrel of Brent at stock exchange ICE rose above $57, and then for about a month fluctuated in the range of $55-58.

However, on 8 March 2017, the energy information Administration of U.S. Department of energy (EIA) reported a sharp increase in commercial oil reserves in the United States — during the week they rose by 8.2 million barrels. (four times higher than forecast), so their total set a new record. Immediately after that, the oil market suffered a collapse of quotations, to the end of the day, a barrel of Brent fell by more than 5%, and the next day for another nearly 2%.

The increase of oil reserves in the US, occurs against the background of rapid growth in the number of wells in which oil production is carried out. According to Baker Hughes, last year their number increased by more than half, from 392 to 609.

“We have a great opportunity. We can use what we have and to grow”, — commented on the situation Reuters the head of the Department of exploration and production company Chesapeake Energy Frank Patterson.

The head of Royal Dutch Shell on the extraction of unconventional Greg Guidry told Reuters that the company is ramping up shale production at a faster pace and is planning to make her the main driver of its growth in the next decade.

Assessment EIA in 2018 oil production in the U.S. will grow by 10% (to 10 million barrels. per day) and will exceed the record, recorded in 1970. If the forecast is justified, shale companies will win a share of the world market and OPEC will satisfy the world’s growing demand for oil, writes Reuters.

The next summit of OPEC, on which the members of the cartel is expected to consider the renewal of restrictions on oil production, will take place in Vienna on 25 may 2017.

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