Russia, S. Arabia Unruffled by American Shale Boom

Russia, S. Arabia Unruffled by American Shale BoomRussia, S. Arabia Unruffled by American Shale Boom

Russia and Saudi Arabia are not losing sleep over an American shale oil boom.

"Demand is growing ... I don't think we should worry," Saudi Energy Minister Khalid al-Falih said at the World Economic Forum in Davos.

Al-Falih, who was speaking at a CNNMoney panel, said global demand will hit 120 million barrels in the next 25 years.

The lack of fear is shared by Russia, currently the world's top oil producer.

"We will need to satisfy the demand and shale is just one of the ways to satisfy the market," said Russian Energy Minister Alexander Novak.

The International Energy Agency said earlier this month that "explosive" increases in US oil output would push it ahead of Saudi Arabia this year and put it in a position to challenge Russia.

The agency, which monitors energy market trends for the world's richest countries, raised its outlook for US production in 2018 to a record 10.4 million barrels. The biggest gains will come from shale.

Both Saudi Arabia and Russia depend on oil exports for a large part of their government revenue.

Saudi-led OPEC and other major producers, including Russia, agreed to cut production in late 2016, a response to oversupply that sent prices to as low as $26 a barrel earlier that year. They agreed in November 2017 to extend the cuts until the end of this year.

Countries that signed up to the accord have largely kept their word. But the group's efforts at supply restraint have been undermined by the US, according to the IEA, which said that a "remarkable" increase in US production last year offset roughly 60% of the cuts.

Falih also told CNBC that cooperation between OPEC and non-OPEC producers should continue—in some form or another—past the end of the calendar year.

He added that Riyadh's bilateral relationship with Moscow would be a "key ingredient" for that to happen. Novak said he "fully agreed" with his Saudi counterpart.

And when asked whether something longer-term was happening regarding the relationship between the world's two largest oil producers, Novak replied, "I have the same feelings and they are based on the fact that firstly we have fairly frequent and positive contact at the highest level."

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