US shale producers, OPEC hold bilateral meetings at CERAWeek
OPEC representatives met with US shale producers along with hedge funds at the CERAWeek energy conference in Houston to discuss taming the global oil glut.
Mohammed Barkindo, OPEC Secretary General said the introductory discussions involving fund executives and shale producers, including Pioneer Natural Resources and ConocoPhillips were unprecedented.
Scott Sheffield, executive chairman of Pioneer said the meeting between shale producers and OPEC officials shows an extraordinary change in the relationship involving the two groups, who are often at odds.
“I’ve seen more dialogue between OPEC and shale producers this year than ever before,” Sheffield told Reuters.
Shale and hedge funds have become important players in increasing the crude supply glut. Low-cost financing from hedge funds for newer producers has forced majors to shift focus from big, long-term projects to those that can quickly generate cash for investors.
Barkindo expects OPEC will continue to reach out to global producers and will hold an event to consider the impact of oil futures on physical crude markets.
“I think we have broken the ice between ourselves and the industry, particularly the tight oil producers and the hedge funds who have become major players in the oil market,” Reuters reported Barkindo said in remarks on the conference sidelines.
In November, most OPEC members along with 13 non-member countries, including major oil producing countries including Russia, Kazakhstan and Mexico signed on to the agreement to cut production in an effort to stabilize prices.
The agreement took effect on January 1.
Khalid al-Falih, the Saudi oil minister, told a group of oil industry executives at the CERAWeek conference that the November pact set a new “cooperative framework” for OPEC to address short-term market turbulence.
“All of us realize that such an expanded network of producers with a larger share of global production is the only way to achieve a constructive, stable market for all,” he said.
So far, compliance with the agreement has been strong and is expected to improve in February from January’s level, Barkindo said.
Last month, participants in the pact reported 86 per cent of the reduction target had been met in the early weeks of the agreement, which has helped increase crude prices by over 10 per cent since November.
OPEC plans to meet in May to discuss a possible extension of the accord.