……..Experts Say U.S. Shale Won’t Fill Gap
As OPEC+ is expected to review its production plans for November during its meeting holding today, industry consensus is that the cartel could consider slashing its output by anywhere from 500,000 bpd to more than a million barrels per day.
While some in the industry have pointed out that cutting its targets isn’t the same as cutting actual production, the fact that the group’s most prolific oil producer, Saudi Arabia, is producing to its current target means that any production cut would at a minimum result in a production decrease from The Kingdom.
Also Read: OPEC+ Plans Oil Production Cut To Address Price Slump
Energy executives who spoke to Reuters yesterday posited that the U.S. shale oil industry may not be able to step in and fill the gap left by an OPEC+ crude oil production cut.
They are arguing that OPEC+ remains in control of the market, and that U.S. shale can’t step in to compensate for any production declines.
“Nothing is going to ramp up fast,” Andy Hendricks, CEO of driller Patterson-UTI, told Reuters. Most companies have 2023 drilling plans nearly set in stone, inflation has increased equipment costs, and labor has grown increasingly difficult to find.
Also Read: OPEC Raises Oil Production – Highest Level Since 2020
The U.S. shale industry has been a competent counter to OPEC actions, at least in recent years, ramping up when OPEC cut production—a perfect counterbalance to keeping prices in check.
But those days are over, oil and gas CEOs told Reuters on Tuesday, and crude oil prices—and gasoline prices—could rise substantially if OPEC+ announces production cuts later this week.
“If OPEC cuts a million barrels a day, I think gas prices would go back up to $6 a gallon,” John Catsimatidis, CEO of United Refining Company, told Reuters.
Gasoline prices in the United States were up on Tuesday to $3.805 per gallon—up from $3.747 per gallon, according to AAA data.
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