Saudi Arabia's Oil Minister Ali al-Naimi
Fri Nov 28, 2014 7:32PM GM
The
booming US shale oil industry is under threat after Saudi Arabia
convinced fellow members from the Organization of Petroleum Exporting
Countries (OPEC) to maintain current oil output, plunging crude oil
prices to four-year low in an oversupplied market.
The high-cost of producing and extracting liquid oil from shale oil deposits is becoming uneconomic following a sharp drop in oil prices after OPEC’s recent decision not to cut oil production, experts say.
According to Reuters, Saudi Arabia's Oil Minister Ali al-Naimi told fellow OPEC members at a meeting on Thursday in Vienna that they must tackle the US shale oil boom by lowering prices and undermining the profitability of US and Canadian oil producers.
"Naimi spoke about market share rivalry with the United States. And those who wanted a cut understood that there was no option to achieve it because the Saudis want a market share battle," said a source who was briefed by a non-[Persian] Gulf OPEC minister after Thursday's meeting.
"OPEC is always fighting with the United States because the United States has declared it is always against OPEC... Shale oil is a disaster as a method of production, the fracking. But also it is too expensive. And there we are going to see what will happen with production," said Venezuelan Foreign Minister Rafael Ramirez.
OPEC policy on crude production will ensure a crash in the US shale industry, Leonid Fedun, a vice president and board member at OAO Lukoil, Russia’s second-largest oil producer, said in an interview in London before the group’s decision.
At the moment, some US producers are surviving because they managed to hedge the prices they get for their oil at about $90 a barrel, Fedun said. When those arrangements expire, life will become much more difficult, he said.
“In 2016, when OPEC completes this objective of cleaning up the American marginal market, the oil price will start growing again,” said Fedun. “The shale boom is on a par with the dot-com boom. The strong players will remain, the weak ones will vanish.”
AHT/GJH
