U.S. oil and gas producers cannot ramp up current production levels too much in the short term to offset an expected drop in Russian oil supply when the EU embargo enters into force later this year, according to American oil executives.
“It’s not like the US can pump a bunch more. Our production is what it is,” Wil VanLoh, head of private equity group Quantum Energy Partners, which invests in shale assets, has told the Financial Times.
There isn’t any bailout for Europe coming from U.S. producers, “Not on the oil side, not on the gas side,” VanLoh added.
The global oil market will have to prepare itself for a loss of 2.4 million bpd supply when the EU embargo kicks in, the International Energy Agency (IEA) said in its Oil Market Report earlier this week. An additional 1 million bpd of products and 1.4 million bpd of crude will have to find new homes, which could result in deeper declines in Russian oil exports and production, the Paris-based agency added.
Current forecasts of U.S. crude oil production growth may have to be significantly revised as the recent slide in active drilling rigs in the top shale basin, the Permian, suggests that output may disappoint due to supply chain constraints and cost inflation in the double digits.
The rig count in the Permian Basin dropped by 2 to 340 last week, as the number of total active drilling rigs in the United States dropped by 1, according to new data from Baker Hughes published on Friday.
At the same time, the Energy Information Administration said in its latest Drilling Productivity Report this week that crude oil production in the Permian is set to hit a record high next month, adding 66,000 bpd from September to reach 5.413 million bpd in October.
Yet not everyone is so optimistic: Pioneer Natural Resources CEO Scott Sheffield said last week that U.S. oil production growth would likely disappoint both this year and next.
By Tsvetana Paraskova for Oilprice.com
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