HOUSTON: Khalid Al-Falih, minister of energy, industry and mineral resources says the Organization of the Petroleum Exporting Countries’ (OPEC) production cuts are working to bolster crude prices and Saudi Arabia will look at whether other oil-producing nations are living up to their promises to curtail pumping before deciding whether to extend the cutbacks beyond this summer.
In a nod to the US’ ability to offset much of the OPEC cuts by pumping oil from shale formations, Al-Falih said Tuesday that he is watching the US producers closely after American oil production bounced back quickly as prices rose last year.
“Some have not lived up to expectations,” he said, “but as a whole if you look at the totality the agreement is working well.”
According to the Energy Department, US production rose to an average of 8.8 million barrels per day (bpd) in the fourth quarter after dropping below 8.7 million barrels (bpd) in the third quarter. The department forecast increases to 9.2 million bpd this year and 9.7 million — a possible record — in 2018 in a market outlook issued Tuesday.
Oil prices have stabilized above $50 a barrel — a rebound from early 2016, when they plunged below $30 a barrel — although some analysts had expected closer to $60.
Speaking at a conference known as CERAWeek by IHS Markit, the Saudi energy minister also said growth in developing nations means that demand for oil will remain strong for the year despite efforts to curb carbon emissions, advances in energy efficiency, and competition from renewable energy.
OPEC Secretary General Mohammad Barkindo of Nigeria met during the Houston conference with CEOs of several leading US shale-oil operators. They told Barkindo how they cut costs and became more efficient.
“They did a great job,” Barkindo said of his organization’s American rivals. Still, some went bust, and layoffs swept the oil patch.
Al-Falih also spoke briefly about Saudi Aramco’s pending IPO. He highlighted Aramco’s investments in the US, including taking control over a Texas refinery that had been run in a joint venture with Royal Dutch Shell, which said it would get $2.2 billion from Saudi Aramco.
In discussing the US shale rebound, Al-Falih said: “The green shoots are definitely here in the US, and maybe they are growing too fast…I am monitoring the watering of the green shoots.”