Posted on 02/24/2016 5:22:59 AM PST by xzins
Saudi Arabia has ruled out a deal by major producers to cut oil output and warned high-cost operators such as US shale drillers to trim costs or go bust in a stark message that triggered fresh pressure on crude prices.
Saudi oil minister Ali al-Naimi said a lack of trust between the world's biggest producers meant a cut in production "is not going to happen". He said the kingdom would instead push for a co-ordinated production freeze to help balance a market swamped with an excess of crude which has taken oil prices to their lowest level in more than a decade.
"There is less trust than normal," Mr Naimi told energy executives in Houston. "Not many countries are going to deliver. Even if they say they will cut production, they will not deliver."
Internationally traded Brent crude dropped $1.33 a barrel to $33.35 after Mr Naimi's remarks on Tuesday, while the US marker slid $1.54 a barrel to $31.85.
The minister was speaking at an annual conference of US energy industry leaders and companies whose prolific exploitation of shale deposits helped topple oil prices, wreaking havoc on the economies of oil-rich countries.
In the absence of co-ordinated action, Mr Naimi said balancing supply and demand should be left to the market.
Mr Naimi, 81, a veteran of booms and busts, denied Saudi Arabia was waging a war with US shale producers. But he said reducing volumes would only provide economic support for expensive oil, such as output from the US or the oil sands of Canada.
"The producers of these high-cost barrels must find a way to lower their costs, borrow cash or liquidate," Mr Naimi said at the IHS CERAWeek conference.
"It sounds harsh, and unfortunately it is, but it is a more efficient way to rebalance markets. Cutting low-cost production [such as Saudi Arabia's] to subsidise higher-cost supplies only delays an inevitable reckoning," he added.
Oil producers are at war with speculators but they have been left speculating themselves over the future of their precious commodity after a unique summit, analysts said. Government ministers and traders alike are anxiously waiting to see which way prices go in coming weeks after Sunday's summit of consumers and producers, which Saudi Arabia called in response to the doubling of the cost of a barrel of oil over the past year to almost 140 dollars.
Market forces are certainly winners from the shift of power
Mr Naimi's remarks come a week after Saudi Arabia joined Russia, Qatar and Venezuela in a provisional output "freeze" if other large producers also agree.
The announcement, which was the first sign of co-operation between producers within and outside the Opec cartel, raised hopes of a move toward action that would curb an oversupply of more than 1m b/d.
Mr Naimi called the freeze the "beginning of a process", and said he sought to meet again with other big producers in March in hopes that they would join.
Senior Gulf officials have said in the past week an agreement to restrain production could be a prelude to further action in the form of production cuts, an idea Mr Naimi appeared to distance himself from.
Oil traders have been more sceptical, noting Opec members Iran and Iraq have not joined the accord.
The producers of these high-cost barrels must find a way to lower their costs, borrow cash or liquidate
Bijan Zanganeh, Iran's oil minister, said on Tuesday that the push for a freeze was "laughable", according to a local news agency. Iranian officials have called on countries such as Saudi Arabia, which have ramped up production over the past year, to curb output.
The last time Mr Naimi spoke at the annual conference, in 2009, crude prices were plummeting amid a financial crisis. Then, Opec slashed production by millions of barrels a day.
Today the cartel — led by Saudi Arabia — has been pumping freely in an effort to knock out higher-cost rivals. The kingdom's production has surpassed 10m b/d for almost a year.
The minister said that after oil tumbled in 2014 he tried to bring together producers from inside and outside of Opec to seek consensus. But there was "no appetite for sharing the burden," he said.
Executives in Houston sounded resigned to a market where Opec would no longer throttle back supplies.
Brian Ferguson, chief executive of Cenovus Energy, an oil sands producer in Canada, said earlier in the day: "By definition, we don't have an oligopoly that's balancing to solve for price. Supply and demand will solve for price."
The real problem is, who’s to stop them? The Saudi’s have been controlling the oil market for eons and who helped them? The US demodummies need to look in the mirror. With the “recent” upsurge in shale oil technology, the U.S. and Canadian oil producers could easily shut down the Saudi’s if it were not for the environmentalists. I can see some changes in the petroleum stronghold with new leadership should Trump get elected. Time will tell.
If we “put US energy manufacturers out of business” do you think that will cause all the oil and gas under US soil to be stuck there forever??
Wanting the frackers to go broke may be what the Sauds want, but fracking cannot be uninvented, and while they may halt operations, research aimed at improving the technology and lowering cost will cotinue. The genie is out of the bottle and the Saud family knows it.
They are also fighting against the EPA, Dept of Energy, the IRS, and the president himself.
He damn near put BP out of business.
At a time when the price of oil is low, this admin is putting new rules and regs on drillers and refiners.
Trade wars are good for the consumer in the short term, unless it results in either a large chunk of the producers going out of business, or in the formation of a Trust (”Trust” as in, Teddy Roosevelt, “trust-buster”) in reaction.
I think that was exactly my point
It wouldn’t surprise me that the Saudis are doing odongo’s bidding.
Odongo couldn’t get the domestic fracking industry to shut down to satisfy the environazis so he’s asked his sauid buds to “flood the market” in order to put the domestic drillers out of business and thus “saving the environment”.
I put nothing past this POS.
Not to mention that Obozo wants to put a $10.00 "fee" on every barrel of oil.
Ya know, to punish those evil oil companies.
F U B O!
it is true that fracking cannot be uninvented. it is also true that big oil has been seriously influenced by Saudi Arabia for decades. It is not unreasonable to assume that big oil has so much influence from Saudi that Saudi controls it. if the frackers go bankrupt, big oil will buy their operations, and they will put production back at the level of over $100 per barrel and they and Saudi Arabia will be back in control. Saudi is looking to buy what they have to buy to get back to status quo.
/bingo
if there are no companies to produce it, how will it get extracted?
They will form NEW companies, once the price point makes it profitable to do so, but then the trade war starts all over again.
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