OPEC’s second and third biggest…
U.S. shale has significantly reduced…
Nigeria is hoping that OPEC will extend the oil production cut deal for the rest of 2017 as the challenge from U.S. shale is showing no signs of subsiding, according to the country’s Oil Minister Emmanuel Ibe Kachukwu. Kachikwu admitted that U.S. shale is OPEC’s biggest problem as production can be cut or boosted in a short time in response to changing market conditions, unlike conventional oil projects.
It’s worth recalling how two months ago, Reuters quoted sources as saying that two senior Saudi energy officials held closed-door talks with some of the biggest shale producers in the U.S., warning them OPEC would not extend the production cut deal to offset their growing output. Apparently, things have changed since then because an extension is near a foregone conclusion.
Kachikwu went on to add that Nigeria will continue to be exempted from any cuts while its output remains less than 1.8 million bpd, but it has plans to boost this to 2-2.5 million bpd within 12 months.
Meanwhile, a Reuters survey revealed that the crude oil output of OPEC continued to fall in April, thanks again to Saudi Arabia cutting more than its fair share as well as outages in Libya and maintenance at Nigeria. Yet international prices remained near the $50 mark as doubts abound whether an extension would have the effect OPEC is after.
U.S. field production of crude oil hit 9 million barrels daily in February and in its latest Short-Term Energy Outlook, the Energy Information Administration expects the average daily production for 2017 at 9.2 million barrels.
Related: All Eyes On Saudi Arabia As OPEC Begins To Unravel
Speaking to media at the offshore Technology Conference, Kachikwu hinted that a policy initiative aimed at curbing shale output, or an agreement within the industry would help OPEC’s efforts. The likelihood of either of these happening is remote, particularly not with a President whose top priority is energy independence and not with an private shale oil industry that has suffered its fair share as a result of what some see as a price war initiated by Saudi Arabia and its allies and others see as a desperate attempt on the part of some OPEC producers to conceal their dwindling supplies.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.