Saudi Arabia has offered harsh advice to oil executives in the U.S. – “lower costs, borrow cash or liquidate”.
The pain in being felt in cities with oil companies, like Houston, Texas, where the local economy is taking a hit. Home sale prices are declining, new home construction is slowing and jobs are being cut.
Thousands of oil company executives are attending the IHS CERAWeek conference in Houston, where the Saudi Arabian oil minister Ali al-Naimi made the remarks.
About 74 U.S. producers are facing problems repaying debt. Several bankruptcies are looming, as reported by Bloomberg.
Shale explorers from Texas to North Dakota will be “decimated” in coming months, according to Mark Papa, the former EOG Resources CEO.
An oil pump jack can be seen in Cisco, Texas, August 23, 2015. REUTERS/Mike Stone
West Texas Intermediate, the benchmark U.S. crude dropped 30 percent last year due to the global glut. The S&P 500 Oil and Gas index has fallen 60 percent in the last 18 months.
Last week the Saudis and Russians agreed to a freeze, but Iran has said it will increase output as reported by CNBC. Naimi believes freezing oil production will balance the market.
He also predicted high-cost producers will get out of the business and demand will eventually fix the oversupply. The International Energy Agency believes this will be a two-year process.
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