OPEC’s Secretary General Mohammed Barkindo on Tuesday called on U.S. shale producers to take responsibility and help curb the global supply glut in the oil market that has kept a lid on prices in recent years.
Speaking at the India Energy Forum in New Delhi, the boss of the Organization of the Petroleum Exporting Countries said “some extraordinary measures” may be needed to balance supply and demand, including help from producers outside the cartel.
“We urge our friends in the shale basins of North America to take this shared responsibility with all the seriousness it deserves, as one of the key lessons learned from the current, unique supply-driven cycle,” Barkindo said.
“We all, at the end of the day, when all is said and done, belong to the same industry and operate in the same markets.”
The oil industry has been battling against a sustained oversupply issues in recent years, partly due to a surge in output from U.S. shale producers. As a result, prices came crashing down in the summer of 2014 and have since failed to recover to their former glory. Crude oil CLX7, +2.88% on Tuesday traded at $49.86 a barrel, down more than 50% from its peak above $100 in July 2014. Brent LCOZ7, +1.90% on Tuesday traded at $56.20 a barrel, also down more than 50% from its top.
In response to the oversupply, OPEC and a group of non-cartel members — including Russia — in late 2016 agreed to slash production to reduce the booming stockpiles around the world. However, the U.S. never joined the accord and has been able to grab market share and rapidly ramp up production since the OPEC-led cuts.
U.S. crude production is expected to climb to 9.84 million barrels per day in 2018, up from 9.25 million barrels in 2017 and 8.85 million in 2016, according to the U.S. Energy Information Administration. In comparison, OPEC output is forecast to rise to 32.8 million barrels a day in 2018, compared with 32.7 million forecast for 2017, according to the group’s latest monthly report.
The current output deal is slated to run until March 2018, but with prices stuck in tight ranges there’s already speculation the agreement can get extended. OPEC has said consultations are under way to continue the deal beyond March, with the possibility of adding new countries.
“The oil supply and demand variables are fast returning to balance after a record three years of unprecedented downturn,” Barkindo said on Tuesday.
“Emerging from this most vicious of all oil cycles, the need to sustain the re balanced market in the medium- to long-term, some extraordinary measures could be considered by countries participating in ‘the Declaration of Cooperation’, including expanding the membership,” he added.
The cartel next convenes in Vienna on Nov. 30 to decide on its output policy.