The oil prices have reached a whole of $75 a barrel, and even US shale producers till now have kept their pledges to hole their spending and not make any output which is clearly different from previous boom cycles. This year has run up when it comes to crude oil prices. However, the OPEC+ (Organisation of the Petroleum Exporting Countries) producers group imposed curbs on output and historically led to a drilling boom. But since the investors are raising their voice for financial returns over volumes and some have also shifted towards renewables, shale firms have decided not to produce crude oil.
Recently, in an interview, Scott Sheffield (Chief Executive of Pioneer Natural Resources) stated that he has confidence that the producers would not respond to the rise in prices. The constant focus on the demands of shareholders has made the shale companies keep their spending low. The US crude future traded $73 a barrel just last week, which is the highest since October 2018, when the price saw a sudden plummet. Back then, the stats of US rigs drilling was approx. 1052 as per Baker Hughes data which has gone down to almost less than half at 470. According to US government data, Shales’ have kept their outputs constantly low, with this month’s running at 7.77 mbpd(Million Barrels Per Day), which is 15.4% below the peak of 9.18 mbpd it reached in Jan 2020. Overall, US first-quarter oil production had an average of 83% in compared to last year’s peak.
The US has finally increased its 2021 average production outlook to 11.08 mbpd due to the rise in crude prices. Even then, it still remains 200,000 bpd lower than last year’s average. As per Scott Sheffield, oil prices soon might even break $80 a barrel. Spike in the oilfield may even raise the service prices, which at present are up by 6%. Pioneer might decrease its active rigs as their operations have become further efficient. The key to the next step lies largely on Shale’s restraint in key. The group has slowly added production depending on the fact that US shale will not be returning to an era of explosive growth. They are set to meet soon to consider whether they would further unwind cuts from August or not. Till now, activity levels have followed the line of the capital discipline narrative. Frack fleet activity has also been steady lately from jumping 20% at the start of the year.