UAE: cut booming shale oil in U.S.

The United Arab Emirates said Tuesday that the cartel could not stop world prices falling -- and called for a cut in booming shale oil output in the United States.

Analysts say that richer cartel members -- like the UAE and Saudi Arabia -- have been ready to accept the price fall in the hope that it will force higher-cost shale producers out of the market.

"We cannot continue to be protecting a certain price," UAE Energy Minister Suhail al-Mazrouei said.

"We have seen the oversupply, coming primarily from shale oil, and that needed to be corrected," he told participants in the Gulf Intelligence UAE Energy Forum in Abu Dhabi.

Kuwaiti Oil Minister Ali al-Omair said: "We expect this situation to continue until the surplus on the market is absorbed and the world economy improves."

Global oil prices have slumped by almost 60 percent since June as the market faces abundant supplies, demand fears and a strong dollar in a stuttering global economy.

The slide accelerated in November when the Organization of the Petroleum Exporting Countries, which provides about 30 percent of global supplies, kept its production ceiling at 30 million barrels per day.

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Oil prices hit fresh lows since 2009

I don't think the UAE is realistic in what they are saying here. Basically, for shale producers to cut production they would likely have to go out of business here in the U.S. So what we are actually talking about is "When does it become cost effective to cut loose some shale operations in the U.S. ?" My thinking is that would be 1 to 2 years from now when businesses would be willing to do that and retrench in some other way. However, I could be wrong. We will see.

So, since the bottom for Saudi Arabia (where they break even) is about 10 to 15 dollars a barrel for oil, that is likely where we are headed at this point. The only question is when and for how long? It's sort of a game of chicken won by whoever has the lowest overhead. This appears to be Saudi Arabia who would win this one hands down at this point. But, once again when???