Continental Resources' chief vows shale will bounce back

One of the leading figures of the US shale revolution insisted the slowdown in US shale was a temporary phenomenon, rejecting claims by Saudi Arabia that it is succeeding in squeezing American oil producers.

Harold Hamm, chief executive of Continental Resources, said he disagreed with claims by a Saudi official, reported in the Financial Times , that the lower oil price had deterred investment in higher-cost sources of oil such as shale.

"They want to stop shale oil," he told the FT. "They might for six months, but not for the rest of time."

He also argued that the Saudi comments would likely strengthen political support in the US for a relaxation of the country's decades-old ban on crude oil exports.

Last November, Opec, the producers' cartel, decided to keep output steady, in effect relinquishing its traditional role of adjusting production to support prices and sending crude sharply lower.

Saudi Arabia later said the strategy was an attempt to put pressure on high-cost producers such as the US shale drillers, though it denied it was trying to target them directly.

The continued weakness in the oil price curtailed drilling activity in US shale, but producers insist they are adapting quickly to the new market conditions. Some claim they will be return to double-digit production growth if the US benchmark West Texas Intermediate continues to tick upwards.

In his interview with the FT, Mr Hamm reiterated his view that a WTI price of about $70 per barrel, up from about $61 today, would be enough to stimulate increased activity and production growth.

Speaking at an FT conference in New York, Mr Hamm said he expected the Saudi comments to "make a lot of people very angry" in the US, drawing an analogy with a Japanese politician who, in 1992, notoriously described American workers as "lazy". "They need to be a little slow to gloat," he said.

In the 1990s, Mr Hamm formed a pressure group that petitioned the US Department of Commerce to impose import tariffs on crude from Saudi Arabia, Mexico, Venezuela and Iraq, which it accused of dumping. The complaint, which was rejected, threatened a diplomatic stand-off with Opec.

US oil producers such as Continental oppose the export ban on US crude, which they argue forces them to accept lower prices for their oil than the international benchmark Brent. WTI, the US benchmark, currently trades at a $7 a barrel discount to Brent. Mr Hamm suggested ending US export restrictions would close much of this gap.

The Continental boss's views on the export ban - which is rooted in the energy crises of the 1970s - are supported by some US lawmakers, who argue that repealing it would enable the US to reduce its allies' dependence on oil from "volatile" regions.

This week a group of bipartisan lawmakers introduced a bill to scrap the ban. Lisa Murkowski, a Republican from Alaska who is the Senate's leading advocate of repeal, said the US needed to "embrace its role as a global energy powerhouse".

In a report published on Thursday, the Center for a New American Security, a Washington think-tank, said promoting oil exports "would help to sustain the benefits of the US oil boom" and enhance the US's ability to stabilise the global market and impose its own energy sanctions overseas.

The export ban is hugely sensitive politically because some believe it could lead to higher petrol prices - though economists think that unlikely.

Rival industrial interests also clash over the issue. Many anti-ban lawmakers are from oil-producing states whose companies would benefit from being able to export crude. But legislators from states where oil refineries are located support the ban because they want WTI to remain cheaper than Brent. WTI's discount to Brent has boosted US refiners' profits since the start of the shale boom.

Environmental concerns are at play, too, with green groups warning that extra production to serve overseas markets would increase the risks of domestic pollution. The Obama administration has indicated that it sees no need to scrap the ban.

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