Oil and Gas

Don’t expect OPEC freeze this month: Expert

How long will oil prices stay low?
VIDEO2:0802:08
How long will oil prices stay low?

The likelihood of leading oil producers coming to an agreement over a possible output cut or freeze this month looks bleak, according to one expert.

"Saudis want the price of oil to be low so that they can knock out the Americans," Gal Luft, senior adviser to the United States Energy Security Council (USESC), told CNBC Friday.

"The Russians want it to be high. I don't see that there is a middle ground, between those who want high and those who want lows. I think (the March 20 meeting) will be a talk for the sake of talk, but nothing concrete will come out of it."

In recent weeks, prices have seen significant swings, partly on the prospect that producers from the OPEC and non-OPEC countries, would gather for a meeting on March 20, to review a potential output freeze.

A Reuters report on Thursday, citing sources familiar with the matter, curbed expectations, however, indicating that Iran was yet to say whether it would participate in such a freeze.

Speaking at the Young Presidents' Organization (YPO) EDGE event in Dubai, Luft said Saudi Arabia needed to keep prices "low enough for long enough" to outpace its U.S. competitors.

Saudi Arabia is the world's largest oil exporter, according to the U.S. Energy Information Administration, and has had to look at and take several cost-cutting measures, while considering alternative areas for growth in this environment of lower oil prices.

"(The Saudis) have two major enemies. One is Iran and the other one is Texas, because the economic threat to the Saudis is the fracking movement that has started to emerge in the United States," Luft said.


Mario Draghi, President of the European Central Bank
Oil slump teaches Draghi a tough lesson
A motorist fills his car with gas at a gas station near an oil field pumping rig in Oklahoma City, Oklahoma.
Why the worst is not necessarily over for oil: IEA

"They want to nip it in the bud and the only way that they can nip it in the bud is to keep the price of oil low enough for long enough, to knock out all these frackers out of the market, drive them into bankruptcy and then go back to business."

In terms of potential bankruptcies, Luft said he and his team predicted about 150 bankruptcies going into effect in North America during 2016.

"Not everybody will go bankrupt, but those with the highest production costs will not be able to survive and those who have any leverage will not be able to survive. I think that will knock out production and at some point the Saudis will feel that the market has balanced itself and we will reach a new status quo," he added.

Follow CNBC International on Twitter and Facebook.