By Liz Hampton and Marianna Parraga
HOUSTON, March 7 The Organization of the
Petroleum Exporting Countries is moving to bring U.S. shale
producers and hedge funds into widening talks about how best to
tame a global oil glut.
The group held unprecedented talks with fund executives on
Tuesday and earlier held meetings with shale producers,
including Pioneer Natural Resources Co and
The introductory discussions were the first bilateral
meetings with shale producers and investment funds, OPEC
Secretary General Mohammed Barkindo said on Tuesday at the
CERAWeek energy conference in Houston.
The two have become important players in adding production
to a world awash in crude oil. Cheap financing for newer
producers has forced majors to turn their focus from big,
long-term projects to those that can generate quick cash for
Last November, OPEC took initial steps to widen its market
reach as it sought to end a two-year price war, striking a
historic agreement with 13 non-member countries, including such
major oil producing nations as Russia, Kazakhstan and Mexico.
Saudi Arabia Oil Minister Khalid al-Falih separately told a
group of oil industry executives at the conference that the
November pact set a new "cooperative framework" for OPEC to
address short-term market turmoil.
"All of us realize that such an expanded network of
producers with a larger share of global production is the only
way to achieve a constructive, stable market for all," he said.
The discussions with hedge funds come as their role in U.S.
energy has grown. Funds have become major equity financiers of
young U.S. oil firms and in some cases owners of production
assets in expanding basins including the Permian in West Texas.
The outreach is expected to continue. Any decision to extend
the OPEC-led production cuts beyond June would have to include
the continued participation by the non-OPEC countries, Secretary
General Barkindo said.
"I think we have broken the ice between ourselves and the
industry, particularly the tight oil producers and the hedge
funds who have become major players in the oil market," he said
in remarks on the conference sidelines.
OPEC plans to hold an event to consider the impact of oil
futures on physical crude markets, Barkindo said, without
Scott Sheffield, executive chairman of Pioneer, said the
meeting on Sunday between shale producers and OPEC officials
reflects an extraordinary change in the relationship between the
two groups, whose interests sometimes are in conflict.
"I've seen more dialogue between OPEC and shale producers
this year than ever before," he said.
The November deal to reduce output is intended to shave
global output by about 1.8 million barrels per day, and reduce a
supply estimated to be about 300 million barrels above the norm
weighing on crude prices. The six-month agreement took effect on
Compliance with the production curbs among top global oil
producers should improve in February from January's level,
Barkindo said. Members of the production accord last month
reported 86 percent of the reduction target had been met in the
early weeks of the agreement.
The OPEC-led accord has helped increase crude prices
by more than 10 percent since the agreement was struck in
OPEC plans to meet again in May.
For more coverage of the CERAWeek conference, see
(Additional reporting by Ernest Scheyder; Writing by Gary
McWilliams; Editing by Brian Thevenot and Lisa Shumaker)