Nigeria Acknowledges U.S. Shale's Growing Clout by Saying OPEC Needs to Lower Costs

Emmanuel Ibe Kachikwu, oil minister for Nigeria, says "OPEC members must lower production costs to compete better with shale producers."

Even though the Organization of the Petroleum Exporting Countries (OPEC) is receiving almost daily press attention for its oil production cutbacks, the real news continues to be U.S. shale, which is rapidly replacing OPEC as the true contender for shaping the market: this was acknowledged indirectly by Nigeria, which believes the cartel needs to rethink costs if it is to compete with the Americans.

In a tweet by CNBC Africa, Emmanuel Ibe Kachikwu, oil minister for Nigeria, was quoted as saying, "OPEC members must lower production costs to compete better with shale producers."

He added that he was "impressed with the work OPEC has done" and "confident prices will hold", but he pointed out that  "What is more fundamental is what OPEC countries can begin to do for themselves in term of costs, diversification."

Nigeria's oil-dependent economy shrank 1.5 percent last year - the first full-year contraction in 25 years - largely due to lower oil receipts; it along with Libya are exempt from OPEC's cutback agreement due to production setbacks.

Meanwhile, even though the market rebounded somewhat on Wednesday after slipping yet again the day before (when West Texas Intermediate crude settled down 4 cents at $54.01 per barrel and Brent crude fell 34 cents to $55.59 a barrel), many analysts attributed this to U.S. president Donald Trump's speech before a joint session of Congress, which Democrats and Republicans alike hailed as masterful.

Daily FX noted that U.S. crude stockpiles continue to swell, having risen now for eight straight weeks: "Meanwhile, oil prices may stumble as official Energy Information Agency weekly inventory flow data comes across the wires: an increase of 1.63 million barrels is expected.

"A private-sector estimate from API published yesterday (but overlooked as the Trump speech dominated attention) argued for a larger 2.5 million barrel build over the same period; if that proves prescient, sellers may attempt to retake the initiative."

Earlier this week, Gene McGillian, manager of market research at Tradition Energy, told CNBC that market woes could come from another source: "Without full compliance by the OPEC cartel and non-OPEC producers, and signs that demand is picking up, we are positioned for a correction."

He added, "There's a risk that some of the new longs will start to head for the exits, and that's where we could see a correction."