Instead of continuing to wage an all-out war on the American shale oil industry, which revealed it would bring about its own demise, and therefore the suicide of its ruling class, Saudi Arabia has shifted gears from fighting to pacification.
OPEC says a price near $60 will avoid added shale production
Recently renewed talks of a production freeze among OPEC and some non-OPEC producers including Russia have helped to bolster the price of oil in recent weeks, but the organization may not try to raise oil prices beyond $60 per barrel for fear of a renewed glut.
On Monday, Russian Energy Minister Alexander Novak and his Saudi Arabian counterpart, Khalid al-Falih, met on the sidelines of the Group of 20 summit in China. A joint statement released by the ministers said “there is an imperative to mitigate excessive volatility harmful to global economic stability and growth.” To that end, the ministers agreed to “act jointly or with other producers,” to help stabilize the price, and have agreed to a Russian-Saudi task force on oil and gas, which will meet in October.
Afraid of shale uptick: OPEC unlikely to make significant cuts to production
OPEC members will likely be very cautious in trying to increase the price of oil, however. The group would like to see the price of oil increase, but they do not want to send prices so high that North American shale producers will lift their output. The result, officials from members of OPEC told The Wall Street Journal, is that the group is unlikely to make significant cuts to production when it meets on September 26.
Shale producers need prices above $60 to launch significant new production, Swiss oil consultant Olivier Jakob wrote in a note Tuesday. Within OPEC, “there is no interest to push crude oil prices” above that level, he wrote, since doing so could spark a new glut that could drive prices down all over again.
Full article: Why OPEC Will Put The Brakes On At $60 Oil (OilPrice)