‘Be cool’: OPEC head plays down US shale threat

The head of the Organization of Petroleum Exporting Countries (OPEC) has denied the group's members are playing a game of chicken with oil U.S. producers.

"That's 100 percent false," Secretary General Abdalla Salem el-Badri told CNBC when asked whether the group was testing the nerve of the U.S. oil industry, adding that American oil production will likely drop from current projected levels.

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OPEC HQ's in Vienna, Austria.
Justin Solomon | CNBC
OPEC HQ's in Vienna, Austria.

"I think the American press is exaggerating this quantity," he said. "That's the message I am trying to get across: please be cool, don't exaggerate the production of tight oil (in North America) because it will decline."

His comments come as the group prepares to meet to agree a cut in production to stem the slide in oil prices.

OPEC members are due to meet on Thursday, and a number of analysts and strategists told CNBC they expected the group to cut production by up to 1.5 million barrels a day to help re-balance the market and lift oil prices from their four-year lows.

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There was no agreement on a cut in production on Tuesday, however, at an impromptu pre-OPEC meeting between members Saudi Arabia and Venezuela, and non-members Russia and Mexico.

This news pushed oil prices lower on Tuesday. By Wednesday morning London time, benchmark Brent crude oil futures had fallen to $78.13 a barrel and U.S. crude was down at $73.79 a barrel.

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Most OPEC members – which supply the world with 40 percent of its oil - are far from happy with this price, however. Venezuelan Foreign Minister Rafael Ramirez told CNBC: "The price has to be $100 per barrel – that's a fair price."

The oil price is coming under pressure from higher-than-expected U.S. shale gas and oil production.

Harry Tchilinguirian, commodity markets strategist at BNP Paribas said U.S. shale oil was "highly scalable and here to stay", however.

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"There will have to be a cut and it will have to be a meaningful cut in order to support the market," he told CNBC. "At these oil prices most OPEC countries are severely fiscally challenged and it's in their best interests to reach a solution. Let's see if OPEC pulls a rabbit out of a hat at this meeting."