By Ernest Scheyder and Anna Driver
(Reuters) - Fears low oil prices will persist for years sent shares of U.S. crude producers tumbling on Friday after OPEC failed to agree on a unified output cap, effectively letting its 13 members pump at will under a policy aimed in part at squeezing out U.S. rivals.
OPEC ministers, who control a third of the world's oil supply, ended their meeting in Vienna on a discordant note, unable to decide as a group how much it should pump in aggregate.
It appeared for a while OPEC would raise its current 30 million barrels per day (bpd) cap on production, but negotiations broke down after Iran said it would not accept any limits until it emerges from Western-imposed sanctions.
Iraq's oil minister echoed those sentiments, asking after the meeting why OPEC members should accept a production cap if non-OPEC oil producers do not have one.
The comments exacerbated oversupply worries and sent U.S. oil prices <CLc1> below $40 a barrel, dragging down U.S. energy stocks.
Global oil prices have already dropped more than 50 percent in the past year, and futures trading indicate Wall Street does not expect them to rise above $50 per barrel until July 2017 at the earliest. <0#CLCAL:>
Tim Rezvan, an oil analyst with Sterne Agee CRT, called the outcome a "bearish near-term event" for the U.S. oil industry.
OPEC gave a tacit acknowledgement that its policy of flooding the globe with crude is harming rivals. In a statement, the group noted that it expects non-OPEC supply of oil to actually contract next year, even as demand rises.
Shares of Whiting Petroleum Corp <WLL.N>, Continental Resources Inc <CLR.N> and Oasis Petroleum Inc <OAS.N>, top North Dakota oil producers, each fell more than 5 percent.
Marathon Oil Corp <MRO.N>, Hess Corp <HES.N> and Occidental Petroleum Corp <OXY.N> each fell between 1 to 2 percent. Most stocks pared earlier losses.
Signaling further pain, the U.S. oil drilling rig count fell this week for the 13th week in the last 14, down to 545, about a third of the number operating this time last year.
Not all of OPEC's members are comfortable with low prices. Many, including Venezuela, need higher oil prices to balance their national budgets.
Given that need, some in the U.S. oil industry hoped OPEC would actually lower production, an expectation that now seems misguided as Saudi Arabia, the group's de facto leader, has pursued a strategy of high production to rattle U.S. rivals.
"I don't see how anybody in their right mind thought that the Saudis were going to cut production," said Mike Breard, oil company analyst at Hodges Capital Management in Dallas.
"I guess some people were holding out hope."
EFFECT ON RIVALS
Senior energy bankers in Houston on Friday said persistently low prices are increasingly separating U.S. shale companies into two camps: those that are strong enough to weather the downturn and those that will need to restructure or go into bankruptcy.
There is so much uncertainty over prices right now that companies cannot plan easily, the bankers said.
Continental, North Dakota's second-largest oil producer, famously cancelled its hedges last fall amid hopes prices would soon rebound. Yet prices have only plunged since then.
Meanwhile, capital raising was hitting bumps. NGL Energy Partners LP <NGL.N> was struggling to muster interest for a new high-yield bond, IFR reported.
Industry leaders said lifting the ban on U.S. crude exports would relieve domestic producers.
"This is just an effort on OPEC's part to see if they can outlast shale oil exploration and production in the United States," said Ron Ness, president of the North Dakota Petroleum Council, an industry trade group. "It's a strong signal back to Congress that it needs to find a way to get that crude oil export ban eliminated."
(Reporting by Ernest Scheyder in Williston, N.D. and Anna Driver in Houston; Editing by Terry Wade, Bernadette Baum and Tom Brown)