The Saudis may go public, OPEC's in disarray, the U.S. is suddenly a global exporter and shale drillers are seeking lifelines from investors as banks abandon them.
Welcome to oil's confusing new world order. For leaders gathering in Houston this week at the IHS CERAWeek conference a key question is: what will break first? Will it be the balance sheets of big U.S. shale companies? The treasuries of Venezuela and Nigeria? The resolve of Saudi Arabia, whose recent deal with Russia to freeze output levels offered the first hint of a rethink?
Seeking clarity at closed-door sessions, cocktail hours and water-coolers in Houston will be some of the industry's biggest players. In a less volatile year, the long-term viability of fossil fuels might have been high on their agenda after December's breakthrough climate deal in Paris.
But within the industry, that debate has "fallen into the abyss of $27 oil," said Deborah Gordon, director of the Carnegie Endowment for International Peace's energy and climate program.
U.S. shale drillers had a key role in bringing prices that low, by adding 4 million barrels a day in less than four years.
Now the companies are victims of their own success. As many as 74 face significant difficulties in sustaining debt, according to Moody's Investors Service. So far, shale bankruptcies have been limited to smaller outfits.
The one thing the stress on companies hasn't done is destroy production. Suddenly, there's oil everywhere. Without a rebound in prices, the consequences for governments — from Russia to Nigeria to Venezuela — range from grim to catastrophic.
As usual in an OPEC meltdown, all eyes have turned to Saudi Arabia, the world's top exporter and architect of the cartel's keep-pumping strategy as it seeks to defend market share. The Saudi Petroleum Minister Ali al-Naimi Saudi will address IHS CERAWeek's main hall on Tuesday morning, in the week's most eagerly anticipated event. A packed audience will be on hand.
