Saudi oil minister to face rival U.S. producers as price rout bites

Sun Feb 21, 2016 1:06am EST
 
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By Luc Cohen

HOUSTON (Reuters) - This week, Saudi Oil Minister Ali Al-Naimi will for the first time face the victims of his decision to keep oil pumps flowing despite a global glut: U.S. shale oil producers struggling to survive the worst price crash in years.

While soaring U.S. shale output brought on by the hydraulic fracturing revolution contributed to oversupply, many blame the 70-percent price collapse in the past 20 months primarily on Naimi, seen as the oil market's most influential policymaker.

During his keynote on Tuesday at the annual IHS CERAWeek conference in Houston, Naimi will be addressing U.S. wildcatters and executives who are stuck in a zero sum game.

"OPEC, instead of cutting production, they increased production, and that's the predicament we're in right now," Bill Thomas, chief executive of EOG Resources Inc (EOG.N: Quote), one of the largest U.S. shale oil producers, told an industry conference last week, referring to 2015.

It will be Naimi's first public appearance in the United States since Saudi Arabia led the Organization of Petroleum Exporting Countries' shock decision in November 2014 to keep heavily pumping oil even though mounting oversupply was already sending prices into free-fall.

Naimi has said this was not an attempt to target any specific countries or companies, merely an effort to protect the kingdom's market share against fast-growing, higher-cost producers.

It just so happens that U.S. shale was the biggest new oil frontier in the world, with much higher costs than cheap Saudi crude that can be produced for a few dollars a barrel.

"I'd just like to hear it from him," said Alex Mills, president of the Texas Alliance of Energy Producers. "I think it should be something of concern to our leaders in Texas and in Washington," if in fact his aim is to push aside U.S. shale producers, Mills said.   Continued...

 
Saudi Arabian Oil Minister Ali al-Naimi talks to journalists before a meeting of OPEC oil ministers at OPEC's headquarters in Vienna in this file picture taken December 4, 2013.  REUTERS/Heinz-Peter Bader/Files