Higher oil prices may boost shale oil production but the global oil market can accommodate this as demand remains healthy, Qatar’s energy minister said on Wednesday.
U.S. energy companies have been adding oil rigs and redeploying cash and workers, cautiously confident the energy sector has turned a corner after the election of President Donald Trump and a commitment signed by OPEC to curb production in the first half of 2017.
Crude prices have held above $50 a barrel since early December, leading to concerns that higher output by U.S. shale producers could offset any further price gains.
The market is “gradually accommodating shale oil and shale gas” and demand is healthy, said Energy Minister Mohammed al-Sada, who last year served as OPEC president.
“With that continuous demand increase I think all available oils are going to be accommodated,” Sada told Reuters in Doha.
“With the current price some fields can be developed profitably though the majority of fields today will not be satisfied with this current price and will not be able to justify further development in high-cost oil fields, especially deep-water and unconventional fields,” he said.
“Those will need a higher price,” he said without offering further details.
Brent crude LCOc1 traded on Wednesday at $54.68.
OPEC and some non-OPEC producers, including Russia, have agreed to cut production by around 1.8 million barrels per day to help reduce supply and support prices in the first such deal since 2008.
OPEC will meet next in Vienna on May 25 to monitor the six-month deal and could extend it for an additional six months.
“The picture will definitely be clearer in May,” Sada said when asked to assess the progress of the agreement.
Sada said adherence to the deal so far was “very high” and that the market was responding positively.
He said it was too early to say whether it would be necessary to extend the pact beyond June, but a drop in inventories had started – a key indicator which OPEC is monitoring to decide whether the deal is enough to balance the market.
“All indications show we are heading in the right direction and the drop in supply started in a very concrete way. That will give us a sort of comfort that the gradual drop (in inventories) towards the five-year average will be clearer down the road,” he said.