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.
“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.
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.
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.”