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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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OPEC Is Back In Control Of The Oil Market 

  • U.S. energy executives see slower shale growth going forward
  • ConocoPhillips’ CEO Ryan Lance: a shale plateau is on the horizon.
  • Saudi Arabia, the United Arab Emirates, and Kuwait all plan to raise their oil production capacity this decade.
Kuwait oil refinery

OPEC is once again the most influential force in global oil supply – and will be so for the foreseeable future – now that U.S. shale production growth is slowing, American industry executives say. 

The days of exponential growth in U.S. oil supply from before the pandemic are over, as capital discipline, returns to shareholders, supply-chain bottlenecks, cost inflation, and lower well production combine to hold back production increases.    

During the 2010s, the shale industry boomed as companies drilled all they could – often beyond their means – to boost production. U.S. oil supply was growing so quickly that America was often referred to as the new swing producer on the market, capable of ramping up output quickly when global oil prices and demand were rising.  

The post-Covid reality is quite different—U.S. shale production is recovering, but at a slow pace, and output hasn’t reached the record levels from late 2019 and early 2020.

“The plateau is on the horizon”

The U.S. Energy Information Administration estimates in its latest Short-Term Energy Outlook (STEO) from this week that U.S. crude oil production would rise from 11.88 million barrels per day (bpd) in 2022 to 12.44 million bpd this year. 

The expected growth of 560,000 bpd year over year is half the pre-pandemic growth pace. For several years, U.S. oil production rose by more than 1 million bpd every year to 2019. 

U.S. oil executives also expect just 500,000 bpd growth this year, some said at the CERAWeek energy conference in Houston this week. 

Growth is set to further slow in 2024, with production seen to average 12.63 million bpd next year, per EIA estimates. That’s less than 200,000-bpd growth from the estimated average level for 2023. 

“The plateau is on the horizon,” ConocoPhillips’ CEO Ryan Lance said at CERAWeek, as carried by the Financial Times.

The U.S. oil industry is now prioritizing shareholder returns, despite criticism from the White House. Faster depletion rates at many wells combine with labor and supply chain hurdles to hold back growth.  Related: Exploding SUV Market Is Another Big Boost For Oil Demand

Chevron, for example, flagged at its investor day last week that it fell short of its performance targets in the Delaware basin in the Permian “primarily due to higher-than-expected depletion after completing long-sitting DUCs.”

OPEC Market Share To Surge 

As U.S. production growth stalls, OPEC’s market share and clout over global oil supply will only rise. The cartel, led by its biggest Arab Gulf producers, is in control of the markets now, shale executives say.

“The world is going back to what we had in the ‘70s and the ‘80s unless we do something to change that trajectory,” ConocoPhillips’ Lance told delegates at CERAWeek. 

According to the executive, OPEC’s market share will jump from around 30% now to close to 50% in the future, in which additional supply comes from OPEC and U.S. shale growth plateaus.  

Scott Sheffield, CEO at the largest pure-play shale producer, Pioneer Natural Resources, told FT on the sidelines of CERAWeek, “I think the people that are in charge now are three countries — and they’ll be in charge the next 25 years.” “Saudi first, UAE second, Kuwait third.”

Saudi Arabia, the United Arab Emirates, and Kuwait all plan to raise their oil production capacity this decade. And they are set to meet a growing share of global oil demand now that U.S. shale cannot and does not want to respond with higher production. 

“The shale model definitely is no longer a swing producer,” Sheffield told FT earlier this year.

The market is now back in the hands of OPEC, but the cartel alone cannot meet all the expected growth in demand. 

OPEC Warns Underinvestment Will Lead To Supply Crunch

Sure, the biggest OPEC producers in the Middle East are investing to boost capacity, but production elsewhere is either shrinking or stalled, while investment in supply has been underwhelming for years, OPEC officials say. 


Increasing capacity and supply is “a global responsibility that OPEC cannot shoulder on [its] own,” OPEC Secretary General Haitham Al Ghais said in Houston. 

The oil industry needs a lot more investments just to keep supply at current levels. OPEC may be doing its part, also in view of raising its market share and influence over the oil market. But few other producers are doing anything, as firms other than the national oil companies (NOCs) of OPEC are put off by continued mixed messages from policymakers about the future of the oil industry in a world chasing net-zero emissions. 

Investment in oil and gas needs to rise significantly if the world wants to avoid sleepwalking into a supply crisis, OPEC officials have been warning for years. 

Unless investments rise, “I am afraid we will have issues for energy security and affordability,” OPEC’s Secretary General Al Ghais said this week.  

Al Ghais also met in Houston with top U.S. shale executives to discuss global oil supply and the tight global spare capacity. Suhail Al Mazrouei, the UAE’s Energy Minister, told Bloomberg TV last month, “I’m not worried about demand — what worries us is whether we are going to have enough supplies in the future.”    

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on March 10 2023 said:
    OPEC+ has emerged from the pandemic as the most influential player in the global oil market and will maintain this position as long as it continues cooperation with Russia. By contrast, US shale oil has been a spent force since it was decimated by the pandemic in 2020. Any reported rise in US shale production will be overwhelmingly hype by the US Administration (EIA) and only a tiny bit realistic.

    Even in 2019 when the Trump administration was encouraging the shale oil industry to flood the market even at huge loss for the sake of undermining OPEC and claiming oil independence and boasting that the United States is the world’s largest crude producer producing more than 12.0 million barrels a day (mbd), it was overwhelmingly hype orchestrated by the EIA in cahoots with Rystad Energy and the International Energy Agency (IEA). Production could never have really hit 12.0 mbd because there is a difference of 1.5-2.0 mbd between the EIA’s weekly and monthly figures, hence the EIA vowing on 6 March to improve the accuracy of its oil data.

    OPEC+’s market share is projected to rise to more than 50% in the foreseeable future because of plans by Saudi Arabia, UAE and Kuwait to expand their production capacity with Russia projected to add 1.5 mbd from Arctic oil by 2026/27 thus adding more clout to the group.

    Moreover, the balance of power in the global oil market has been shifting overwhelmingly in favour of the National Oil Companies (NOCs) at the expense of the International Oil companies (IOCs). This is partly due to a resurgent resource nationalism.

    Whilst top IOCs such as Total, BP, Shell, Chevron, ENI, ConocoPhillips, ExxonMobil, Equinore and Repsol have reserve estimated to last from 8.0-10.5 years, the NOCs of countries like Saudi Arabia, Iraq, UAE, Venezuela, Russia and Kuwait to name but a few have access to proven reserves which could last from 66-91 years.

    Overall average IOCs’ reserves in place have fallen by 25% since 2015 with less than 10 years of total annual production available. For instance, oil supermajor Shell expects to have produced 75% of its current proven oil and gas reserves by 2030, and only around 3% after 2040.

    In fact, the last three produced barrels of oil in the world will come from three regions: the Arab Gulf region, Venezuela’s Orinoco Belt and Russia’s Arctic with the very last barrel most probably coming from Iraq.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

Leave a comment

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