The price of oil will peak and then fall, according to Al-Falih

The gradual decline in oil prices in the coming years could prompt Saudi Arabia and OPEC to regain some market share from the US, according to the head of oil and gas research in Europe, the Middle East and Africa (EMEA) at J.P. Morgan.

Saudi Arabia and OPEC are “there to support oil while they are effectively pregnant with all this economic growth and capital they have got to deliver. But, having said that, what we are saying to the bulls is: Don’t get used to it,” said J.P. Morgan’s Christyan Malek.

Earlier this week, OPEC and 10 other allied producer partners agreed to keep 1.2 million bpd on the market for another nine months. The energy alliance, sometimes referred to as OPEC +, has been cutting production since 2017 as part of a continuing effort to boost crude oil prices.

The Middle East-controlled group managed to keep crude oil futures near $60 a barrel, however five years after oil prices kept trading above $100. But the long period of production cut has seen its share of the world oil market sinking to its lowest level in nearly three decades.

At the same time, the shale industry in the United States has expanded at such a rapid rate that it threatens to overcome OPEC-led efforts to ease demand fears, flooding the world oil market with supply. Asked if he thought Saudi Arabia could change this and manage to outlast the oil shale industry in the United States, Malek said: “I think, at the moment, with OPEC and Saudi focusing on fiscal (and) economic policy, they are absolutely two feet in the value camp.” “… I mean three of four years ago, who would have thought that they would be happy with $60 to $70?” said Malek. “In a few years’ time I expect $50 to be an okay oil price, at which point that could see Saudi and OPEC reclaim that market share and then it becomes more competitive,”

Brent crude traded at $63.80 on Thursday morning, remaining unchanged from the previous session. Meanwhile, West Texas Intermediate (WTI) settled at $57.13, down nearly 0.4%.

Saudi Energy Minister Khalid al-Falih told reporters in Vienna earlier this week that shale will go the same way as every basin in history. The price will “peak, plateau and then decline,” he said.