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Officials from Saudi Arabia – the de factor leader of the Organization of Petroleum Exporting Countries (OPEC) – told American oil producers this week that they should not expect the bloc to extend or increase its output cuts to make up for the jump in shale production in the United States, according to an exclusive report by Reuters.
At the end of last year, the members of OPEC and 11 other nations agreed to cut their oil production for a combined total of 1.8 million barrels in order to correct the global oil supply glut that has been plaguing the market since 2014. The United States is not part of OPEC and is not one of the eleven NOPEC nations that have chosen to curb production to help oil prices recover.
"One of the advisors said that OPEC would not take the hit for the rise in U.S. shale production," an American executive who attended the meeting with Saudi Oil Minister Khalid al-Falih told Reuters. "He said we and other shale producers should not automatically assume OPEC will extend the cuts."
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U.S. shale oil production is expected to rise beyond 9 million barrels a day by the end of 2017. The total number of active oil and gas rigs in the country is now 756, according to oilfield services provider Baker Hughes, which is 267 rigs above the rig count a year ago.
The meeting between senior Saudi officials and representatives from six U.S.-based companies—Anadarko, ConocoPhillips, Occidental Petroleum, Pioneer Natural Resources, Newfield Exploration and EOG Resources—took place Tuesday evening. Saudi officials and spokespeople from the firms involved all either declined to comment or did not return requests for comment by Reuters.
At an energy conference in Houston this week, al-Falih emphasized that there would be no “free rides” for shale producers from North Dakota who have benefitted from the new $55 Brent barrel and brought new rigs online as a result.
OPEC will meet again at its headquarters in Vienna on May 25th, where the group is expected to decide whether or not to extend the six-month period of its output curbs, depending on the state of global oil markets.
By Zainab Calcuttawala for Oilprice.com
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Zainab Calcuttawala is an American journalist based in Morocco. She completed her undergraduate coursework at the University of Texas at Austin (Hook’em) and reports on…