Saudi Arabia's oil minister says global producers are watching how U.S. shale oil responds to improved economics very closely. File photo by Gary C. Caskey/UPI. | License Photo
March 17 (UPI) -- Saudi Arabia's oil minister told Bloomberg News that, as the de facto head of OPEC, a wait-and-see approach was good policy on recovering U.S. oil.
The Organization of Petroleum Exporting Countries is leading an effort to correct an oversupplied market through managed declines. The move, enforced in January, helped bring oil prices back to around $50 per barrel, after crashing below $30 per barrel in early 2016.
Last year's weakness followed a market phase characterized by emerging shale oil and OPEC defending a global position through robust production policies.
While OPEC is cutting production through managed declines, the floor under crude oil prices boosted investor confidence in the U.S. shale oil sector, which has proven more resilient to lower crude oil prices than expected.
Saudi Arabian Oil Minister Khalid al-Falih told Bloomberg that the U.S. oil sector was a factor to watch.
"I have made clear that the excessive production that I saw coming out of shale three, four years ago cannot be absorbed by the global market," he said. "We will see what levels of production are. We hope they will be manageable."
The U.S. government reported crude oil production of 9.1 million barrels per day for the week ending March 10, up 21,000 barrels per day from the previous week and 41,000 barrels per day year-over-year.
For Saudi Arabia, economists at OPEC reported total crude oil production increased to more than 10 million barrels per day last month, even as the country leads the effort to balance the market.
Olivier Jakob, managing director of Switzerland-based consultant Petromatrix, said in February that OPEC's goals through the duration of the six-month agreement depend in large part on how much production comes from members operating outside the deal.
Falih told Bloomberg the managed decline effort would continue "if the markets are still not confident in the outlook, if we don't see companies and investors feel good about the health of the global oil industry."