Saudi Arabia and Russia become more comfortable rebuilding revenue from higher oil prices as the US shale industry remained subdued, analysts said. The confidence explains why OPEC+ continues resisting calls for more supplies and instead sticks to its plan to gradually taper its output cuts. The group’s tight supply management has been associated with the increase in oil prices, which hit a three-year high of $86.70 per barrel in October.
OPEC+ has no worries that rising oil prices would prompt a fast response from US shale producers, Reuters reported, citing sources familiar with the matter. After the pandemic-driven demand collapse, US shale companies went under growing pressure to scale back spending and expansion and prioritize returns to shareholders. That pressure has been preventing them from reviving upstream activity even as oil prices have exceeded levels that would have previously triggered a shale drilling spree.
OPEC forecast US shale oil output to be steady this year and increase by a mere 400,000 bpd next year, although other forecasters suggest a larger gain. Output from the Permian Basin, the largest US shale field, is projected to reach 4.89 million bpd in November, just below the peak of 4.91 million bpd in March last year. However, other US shale regions are likely to lag, with combined output expected at about 25% lower than their peak in early 2020.
However, US shale producers are planning to raise their spending and output next year. On Tuesday, BP said it would raise expenditure on its US shale assets by $500 million in 2022. Exxon’s shale production rose by 30% to about 500,000 bpd in the third quarter and could add two new drilling rigs, its CEO said last week. Meanwhile, Chevron said it would add two rigs and increase well-completion crews in the fourth quarter to boost its shale output in early 2021. Hess Corp plans to add a rig in the Bakken field to raise its shale production by up to 8% this quarter.
