Despite rising oil prices, U.S. shale oil industry curbs production Reuters

By Liz Hampton

(Reuters)-Even if oil prices soared to US$75 per barrel, US shale oil producers are still fulfilling their promises to keep expenditures unchanged and production levels flat, which runs counter to the previous boom cycle.

The increase in crude oil prices this year and the oil production restrictions imposed by the OPEC + oil-producing countries group will historically trigger a drilling boom. But investors demand more financial returns, and energy financiers are turning to renewable energy, so shale companies are determined to maintain self-discipline.

“I still believe that manufacturers will not react to price increases,” said Scott Sheffield, the company’s chief executive officer. Pioneer Natural Resources (NYSE:), the largest producer of shale oil fields in the Permian Basin. In an interview with Reuters, he stated that the focus on shareholder returns has been kept low.

Last week, benchmark futures trading prices were higher than US$73 per barrel, the highest level since October 2018. There were 1,052 rigs in the United States at the time https://graphics.reuters.com/USA-OIL/ENERGY/nmovaxkjepa, but today there are far less than half as many: according to Baker Hughes, it is about 470.

According to US government data, shale oil production is still well below the peak of 9.18 million barrels per day in January 2020. The output of the seven largest oil fields this month was 7.77 mbpd, or 15.4% below that level. The total US oil production in the first quarter averaged 83% of last year’s peak. Due to rising crude oil prices, the United States recently raised its 2021 average production forecast to 11.08 mbpd, but it is still about 200,000 bpd lower than last year’s average.

“The oil price here may soon exceed US$80 per barrel, and I don’t think any rigs will be added,” Sheffield said. The surge in oilfield activity may push up service prices that have risen by about 6%. He said that as operational efficiency improves, Pioneer may reduce its active drilling rigs.

OPEC easing policy

Shale restraint is the key to OPEC’s next move. The oil producer group is gradually increasing production, believing that U.S. shale will not return to the era of explosive growth. It will meet on Thursday and consider further lifting the cuts from August.

“So far, the level of activity supports the narrative of capital discipline,” said Jonathan Godwin, a senior assistant at data provider Enverus. He said that since the 20% jump at the beginning of this year, the activities of the Frack fleet have remained stable.

In the United States, closed companies have made a significant contribution to increasing rigs this year, but Sheffield said these smaller companies should not increase enough production to anger OPEC+ producers.

“The quality of land in private companies is not as good as public companies,” Sheffield said, estimating that private companies account for 40% to 50% of the number of drilling rigs in the United States.

“We don’t see the upward pressure that we usually forecast based on the $73 oil price,” said Paul Mosvold, president and chief operating officer of drilling company Scandrill, which operates equipment that has been in high demand since the oil market recovered.

Mosvold reported that as oil prices climbed, the number of callers increased slightly, but said it was “not large.”