U.S. shale producers have behaved in an exemplary way in the past year. It wasn’t something the industry wanted to do. It was something it was forced to do by the pandemic and by its shareholders, who after years of waiting for windfalls put their foot down and demanded higher returns. But it just might be time for a change.
U.S. shale may now be useable to the price shocks. Even so, the pandemic-driven destruction of demand for crude must have hurt. On top of that pain, the large public shale producers had many unhappy shareholders to deal with. They dealt with them by cutting spending, slashing production, and focusing on cash flow generation.
They largely did it with some help from OPEC+, which cut an unprecedented 7.7 million bpd from its combined production, and some non-OPEC producers that stepped in to shoulder part of the burden. Since then, demand has recovered, and so have prices. All eyes have been on U.S. shale for months now, expecting drillers to start ramping up drilling in a major way. So far, the industry has defied expectations. But it seems this won’t continue for much longer.
U.S Crude Oil Production
U.S. crude oil production is set to rise by 800,000 bpd next year, the Financial Times reported this week. This is hardly surprising given that U.S. oil prices are around $70 per barrel now, making most shale wells profitable again, the report notes. But there is one interesting thing that is different this time. According to an IHS Markit analyst, it would be private independent drillers that will lead the charge this time.
As interesting as this forecast is, it is hardly surprising. Even before the pandemic struck, disgruntled shareholders were the talk of the town in shale oil.
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Source: Oil Price
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