Producers of “tight oil” from shale rock formations will be hurt by the fall in crude prices before members of OPEC, according to the group’s Secretary-General.
As much as 50 percent of tight oil output is at risk at current prices, while the Organization of Petroleum Exporting Countries is not in a critical situation, Abdalla El-Badri said at the Oil & Money conference in London today.
“First of all, will be the tight oil,” affected by the drop in prices, he said. “There’s no doubt about it.”
Crude collapsed into a bear market this month as Saudi Arabia and other producers deepened price discounts for their oil. Global supplies are rising as the U.S. pumps the most oil in almost three decades and Russia’s output nears a post-Soviet record.
“If prices stay at $85, we will see a lot of investment, a lot of projects, a lot of oil going out of the market,” El-Badri said. Front-month Brent crude futures, the global benchmark, traded at $86.72 a barrel on the ICE Futures Europe exchange in London at 10:17 a.m.
The fall in prices since June does not accurately reflect the supply situation in the market, El-Badri said.
“We see that demand is still growing, that supply is also growing, but the magnitude in the increase in supply does not really reflect this 25 percent change in the market,” he said. “Unfortunately everybody is panicking.”
OPEC, which supplies about 40 percent of the world’s oil, will still need to produce between 29 million and 30 million barrels of oil a day next year to satisfy demand, compared with production of “about 30 million” currently, El-Badri said.
OPEC is next due to meet to review its production target on Nov. 27 in Vienna. The current target of 30 million barrels a day has been in place since January 2012.
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