OPEC Won't Extend Oil Cutbacks Due to Shale Growth, but UAE Thinks Cutbacks Can Still Work If Everyone Complies

Several OPEC members currently overproducing under the cutbacks.

Having spent most of the week stating that it will not continue to bear the brunt of oil production cutbacks on behalf of Organization of the Petroleum Exporting Countries (OPEC) members who are either not living up to or defying the cartel's cutback initiative, Saudi Arabia has extended its hard line to include U.S. shale drillers - this time warning that the drillers may compel OPEC not to extend its cutbacks beyond six months.

Two industry sources told Reuters that senior Saudi energy officials told leading U.S. oil firms in a closed door meeting at the CERAWeek convention in Houston that they should not assume OPEC will extend its cutbacks to offset rising shale production; the meeting reportedly included executives from Anadarko, ConocoPhillips, Occidental Petroleum Corp, Pioneer Natural Resources, Newfield Exploration, and EOG Resources.

Neither the Saudis nor the executives would comment on the matter, but the meeting was the talk of media circles at CERAWeek, with CNBC Futures Now host Jackie DeAngelis telling viewers, "I did hear [that] late in the evening they all got together, you had all the big players in Houston talking about where do we go from here.

"And there really wasn't much of a consensus."

It is widely expected that U.S. oil output will rise 330,000 barrels per day (bpd) this year, mostly from shale, but some analysts think it could wind up being over double that amount.

But while recovering American production combined with growing inventories caused crude prices to plunge 5 percent on Wednesday, Suhail bin Mohammed al-Mazrouei, energy minister for the United Arab Emirates, attempted to put a positive spin on the situation by telling Reuters "I think this is a temporary thing: the market will continue to go up as we hold to the agreement."

The UAE is one of several OPEC members who are overproducing in defiance of the OPEC cutbacks, to the tune of 42,000 bpd above its designated target (Iraq is 91,000 bpd above its quota, while Venezuela is 43,000 bpd above).

One of the many questions arising from the quagmire of current market dynamics is: given the volatility of prices, what is the break even point for U.S. producers?

Ben Van Beurden, CEO for Royal Dutch Shell, provided one answer by remarking to CNBC that the break even price in the Permian Basin at least is $40.

He added that the U.S. is Shell's "number one" destination for doing business.

Earlier at CERAWeek, Bob Dudley, CEO of BP, told CNBC that while market conditions have improved and some confidence has returned, his company is not planning on an uptick in prices: "We're going to plan on a $55-$60 world for the next five years and we're going to live with a strict capital diet."