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OPEC+ has been doing a brilliant job in managing supply and demand balances in the pandemic and every American oil producer appreciates the alliance’s efforts, Occidental’s chief executive Vicki Hollub said on Tuesday.
Thanks to the massive production cuts that OPEC+ started in May 2020, after a brief Saudi-Russian price war that only contributed to the oil price crash, oil prices stabilized later in the summer of 2020 and rallied this year as vaccination rollouts and economic stimulus made the market more optimistic about global oil demand later this year. U.S. producers are making profits by drilling new wells at $60 oil—a price point above the breakevens of many areas across the Lower 48.
And now the top executive of one of the biggest shale producers praised the efforts of the market competitor, the OPEC+ group, in bringing supply and demand back to balance.
“They’ve been brilliant in the way they’ve handled it, the way they’ve been doing it,” Hollub said at the 75th Annual Convention of the Texas Independent Producers & Royalty Owners Association (TIPRO), as carried by Bloomberg.
“Every U.S. oil and gas company are appreciating their efforts,” Oxy’s chief executive said.
OPEC+ is more or less betting on U.S. shale not racing to boost production at these higher prices, but it will surely watch for signs of spending discipline potentially breaking.
U.S. shale production as a whole is unlikely to return to the levels before the pandemic, Occidental’s Hollub said on the CERAWeek by IHS Markit last month.
“The severe drop in activity in the U.S. along with the high decline rates of shale and the pressure from investment community to maintain discipline instead of growth means in my view that shale will not get back to where it was in the U.S.,” Hollub said, as carried by Reuters.
U.S. oil production may not hit 13 million bpd any time soon, or ever, but producers have turned much more optimistic about oil prices and demand and have already increased drilling activity from last year’s trough.
Due to expectations that WTI Crude prices will stay above $55 per barrel this year, U.S. oil production is set to increase from an average 10.9 million bpd in the second quarter to nearly 11.4 million bpd by the fourth quarter, the Energy Information Administration (EIA) said in its Short-Term Energy Outlook for April this week.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.
She and US oil giant ExxonMobil CEO Darren Woods had the courage to succinctly and eloquently make their position clear on calls for divestment of oil and gas assets and on zero emissions when they both said at the CERAWeek conference in March this year that “reducing carbon emissions from fossil fuels and not the actual use of fossil fuels, offers the best way to combat climate change”.
She also admitted that thanks to OPEC+ production cuts along with vaccination rollouts and economic stimulus, US shale oil producers are making profits by drilling new wells at $60 oil.
Let us hope shale oil drillers have learnt an important lesson not to produce recklessly and undermine OPEC+ efforts to stabilize the global oil market and support oil prices.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London