Despite $70 oil, U.S. shale producers are not expected to significantly raise crude production this year as they continue to be focused on disciplined capital expenditures and returning more cash to investors, OPEC sources told Reuters at the end of policy meetings of the organization.
OPEC’s economic and technical think-tank, the Economic Commission Board, met this week to take stock of the situation on the global oil market and the global economy. The board was also expected to review topics such as investment, expectations about recovery, and short- and long-term prospects of crude oil production.
One of the meetings, attended by external industry experts, focused on U.S. shale and the prospects of supply out of the United States, sources at OPEC told Reuters. The general view was that the shale patch will not be rushing into accelerating activity and production rates despite the high oil prices—something it has regularly done in the past, contributing to market oversupply and lower oil prices.
For 2022, the views range from production growth of between 500,000 barrels per day (bpd) and 1.3 million bpd.
U.S. production has been hovering at around 11 million bpd in recent months, down by 2 million bpd from the record highs early in 2020, before the pandemic slammed demand and crashed oil prices.
The first-quarter earnings and conference calls of U.S. producers highlighted a previously unheard-of restraint from public shale firms. Listed producers generated record cash flows, but they are not reinvesting most of those back to drilling. Instead, shale operators are now channeling cash flow toward reducing debts and rewarding shareholders.
According to Reuters’ sources, the investment discipline was one of the highlights of the meetings this week.
The U.S. shale restraint makes OPEC’s job of managing oil supply to the market much easier, if forecasts of limited U.S. growth this year pan out.
“OPEC and Saudi Arabia have a lot of power at this time,” a source at one of the companies which provided forecasts to OPEC told Reuters.
By Tsvetana Paraskova for Oilprice.com
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