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US oil producers are unable to increase supply to contain soaring crude prices which remain “under OPEC control”, according to the shale patch’s largest operator.
Brent crude jumped to a three-year price above $ 80 a barrel last week, sparking fears of a deepening global energy crisis that has already pushed natural gas and coal prices in Europe and in Asia to record highs.
But Scott Sheffield, managing director of Texas-based Pioneer Natural Resources, said once-prolific US shale producers will continue to use their burgeoning cash flow to pay shareholders, not to fund new drilling.
âEveryone is going to be disciplined, whether it’s $ 75 Brent, $ 80 Brent or $ 100 Brent,” Sheffield said. “Every shareholder I have spoken with has said that if somebody gets back to growth, they will punish these companies.”
âI don’t think the world can count on American shale very much,â he said. “It’s really under OPEC control.”
Pioneer bought two rival producers from Texas this year, making it the largest prolific oil producer in the Permian Basin with production of almost 360,000 barrels per day, more than some of the smaller cartel countries. OPEC tanker. He said he would cap any increase in production next year at 5%, well below double-digit rates from previous years.
The Pioneer chief’s comments come as the US government puts pressure on Saudi Arabia, the de facto OPEC leader, to increase the supply of crude in order to bring oil price inflation under control. energy.
The expanded Opec + alliance, which also includes allies such as Russia, will meet on Monday to decide whether or not to maintain production targets.
Last year, the group agreed to sharp production cuts to restore crude prices which plunged as pandemic lockdowns affected energy use.
But supply is now lower than demand as economies recover, with global crude inventories shrinking at a record pace, according to Goldman Sachs. Last week, the bank raised its year-end Brent forecast from $ 80 to $ 90 a barrel. On Friday, Brent settled at $ 79.28.
Some analysts say the gas crisis in Europe and Asia could spill over into liquid fuel markets, pushing up demand for crude this winter as industries burn more oil to generate electricity.
Opec + agreed in July to add 400,000 bpd each month until the end of 2022, but some analysts say supplies need to increase faster to contain further price inflation.
US National Security Advisor Jake Sullivan discussed oil prices with Crown Prince Mohammed bin Salman of Saudi Arabia last week, according to the White House.
Sheffield said that while the Biden administration called on Opec to increase its supplies, it was trying to “slow down American drilling in any way possible” through measures such as a moratorium on the leasing of federal land for the drilling.
“They prefer to import crude oil from OPEC,” he said.
The boom in shale production over the past decade has made the United States the world’s largest crude producer, pumping nearly 13 million barrels of crude per day by the end of 2019.
But years of debt-fueled drilling have depleted some fields, operators say, and angered investors, leaving the sector vulnerable when the pandemic hit in 2020. The collapse in prices forced producers to cut back their prices. capital expenditure and unused platforms.
Drilling activity has started to pick up, leading some analysts to predict a modest increase in production, but production remains nearly 15% below the pre-pandemic peak.
Sheffield said securing a Permian deal would also temper producers’ reactions to the price hike.
“There are only four or five companies that have a core (area)”, and the shale would never again reach the annual growth of around 1.5 Mb / d observed in previous years, he said. declared.
âMaybe a million, at most, for a few years,â Sheffield said.