U.S Cut Production of Shale Oil Until Crude Prices Rise

Despite the trend of oil prices to reach about $ 75 a barrel, shale oil producers in the United States are fulfilling their pledges to maintain the current level of spending and production stability, unlike what happened during previous booms.

In the past, the rise in crude oil prices, as happened this year, and the restrictions on oil production imposed by the OPEC+ group of producers, led to a boom in drilling activities.

But investors are demanding financial returns when volumes rise as energy financiers switch to renewables, so shale companies are intent on curbing production.

“I remain confident that producers will not act in response” to higher prices, said Scott Sheffield, chief executive of Pioneer Natural Resources, the largest producer in a field in the Permian shale. He added in an interview with Reuters that the focus on shareholder returns has kept spending low.

Last week, US crude futures traded above $73 a barrel, the highest level since October 2018. At the time, the number of US rigs was 1,052 but today it is well below half that number, about 470, according to Baker Hughes data.

Shale oil production is still much lower than the January 2020 peak of 9.18 million barrels per day, as production from the seven largest fields this month reached 7.77 million barrels per day, or 15.4% less than that peak, according to US government data.

Total US oil production in the first quarter averaged 83% from last year’s peak. The United States recently raised the average production forecast for 2021 to 11.08 million barrels per day due to the rise in crude oil prices, but this level is still about 200,000 barrels per day lower than the average of last year.

Curbing shale oil production is crucial to OPEC’s next move. The group has gradually increased oil production and is confident that US shale oil will not return to the era of explosive growth. It is scheduled to meet on Thursday to consider another reduction in production cuts from August.