Saudi Arabia: Fracking means $100 oil price is history

By Wael Mahdi

Photo credit: Foter / CC BY-SA
Photo credit: Foter / CC BY-SA

(Bloomberg) — Oil prices won’t rebound to $100 a barrel because increased prices would draw more shale and other output from higher-cost producers to the market, said Mohammed al-Madi, Saudi Arabia’s governor to OPEC.

“I think it will be difficult to reach $100 or $120 another time,” al-Madi said at a conference in Riyadh on Sunday. “This will let the high-cost producers come back again.” Saudi Arabia, the nation leading OPEC in defending its share of the global oil market, will keep investing to maintain its current output capacity, he said.

Brent oil, the global benchmark, declined almost 50 percent in the past year as Saudi Arabia and others in the Organization of Petroleum Exporting Countries committed to maintain output amid a global surplus. U.S. output is the highest in three decades as drillers pump crude from shale.

“Shale oil companies are one of the high-cost producers that benefited from high oil prices,” al-Madi said. “We’re not against shale oil. We welcomed shale oil but it’s not fair for high-cost producers to push low-cost producers out of the market.”

The world needs $40 trillion of oil investments in the next two decades to meet growing demand led by emerging nations, al- Madi said. Demand will grow 1 million barrels a day every year for the next 15 years to about 111 million barrels a day, Nasser Al-Dossary, Saudi Arabia’s OPEC national representative, said at the same conference on Sunday.

Saudi Arabia produced 9.85 million barrels of crude a day in February, the most since September 2013, according to data compiled by Bloomberg. U.S. output reached 9.42 million barrels a day this month, the highest rate in weekly Energy Information Administration data going back to 1983.

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