Opec calls on US shale oil producers to slash global supply, prop up prices

Opec's Secretary General Mohammed Barkindo on Tuesday called on US shale oil producers to help curtail global oil supply, warning extraordinary measures might be needed next year to sustain the rebalanced market in the medium to long term.

"We urge our friends, in the shale basins of North America to take this shared responsibility with all seriousness it deserves, as one of the key lessons learnt from the current unique supply-driven cycle," said Barkindo.
The comments by the Organisation of the Petroleum Exporting Countries official came during a speech delivered at a conference in New Delhi.

While Opec and some other producers, including Russia have cut supplies this year in order to prop up prices, US production has soared by almost 10 per cent this year, driven largely by shale drillers. Barkindo said he hoped that new producers, not just US shale drillers, would join production cuts.

On Monday, Saudi Arabia cut crude oil allocations for November by 560,000 barrels per day (bpd), in line with the kingdom's commitment to the Opec-led supply reduction pact.

Still, the top oil exporter plans to ship slightly above 7 million bpd next month, up from low levels during summer when domestic demand was at its peak.
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The writing is on the wall for Opec: It needs to cut more

Brent and WTI are in bear territory, having crashed 22% from the year's highs. You can call crude over-sold, you can put it down to technical and algorithmic trading. But you can't ignore the fact that it is more than just fickle, volatile sentiment this time: the OPEC/non-OPEC cuts may be removing up to 1.7 million b/d from the market, but the growth in US, Libyan and Nigerian output is putting more than 1.5 million b/d back, leaving net reduction at less than 200,000 b/d.

Of course, the producer group could continue advising patience to the world for the elusive evidence of a decline in global oil inventories, as it has being doing for the past few months. But this week proved that no one is listening any more.

Crude’s clumpy cascade this week into bear market territory could be put down to algorithmic and technical selling, but for the purposes of this discussion, the mechanism behind the latest downward spiral is moot. OPEC needs to respond not to the crude traders’ seeming paranoia, but to the fact that its current quantum of cutbacks have been all but neutralised.

OPEC and its non-OPEC collaborators are in a corner, but if the Saudi and Russian energy ministers stand behind their “whatever-it-takes” pledge of last month to rebalance the markets, the time has come to deepen the cuts. It won't be easy, but it is not impossible and a far more suitable option for OPEC than admitting defeat.
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