US oil firms tell OPEC their growth will slow

FILE PHOTO: A drilling rig on a lease owned by Oasis Petroleum operates in the Permian Basin oil and natural gas production area near Wink, Texas U.S. August 22, 2018. Picture taken August 22, 2018. REUTERS/Nick Oxford

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SULAIMANI — US oil producers sought on Wednesday (January 23) to soothe OPEC’s worries about losing market share, telling the group that investors in the US firms wanted a reduction in growth and higher payouts.

 The Organization of the Petroleum Exporting Countries and non-OPEC allies such as Russia have cut output since 2017 to support oil prices, while watching producers in the United States, which is not party to the cuts, drive up production, according to Reuters.

The United States has overtaken Russia and Saudi Arabia to become the world’s biggest crude producer. Output is approaching 12 million barrels per day (bpd).

OPEC’s forecasts and even US government predictions have repeatedly underestimated US output growth.

The bosses of US firms Occidental Petroleum and Hess Corp, attending a session at the World Economic Forum in Davos, said that growth of US shale oil output would slow.

The session was a rare occasion when US producers and an OPEC representative, OPEC Secretary-General Mohammed Barkindo, sat on the same panel.

“I believe not as much money will be pouring into the Permian basin this time. I believe investors will hold companies accountable for returns and a lot of this didn’t happen previously,” Occidental Chief Executive Vicki Hollub said.

Echoing her comments, Hess Corp founder and Chief Executive John Hess said shale production now accounted for about 6 percent of global production. “It will probably go up to 10 percent by mid-decade but then it flattens out,” he said.

But he added that US resources would start to degrade. “Shale is not the next Saudi Arabia. It is an important short-cycle component,” he said.

US President Donald Trump has repeatedly criticized OPEC for manipulating prices and demanded several times last year that the group bring them down. He has also praised OPEC, and its de facto leader Saudi Arabia, when prices have fallen.

Oil prices surged above $86 a barrel in October, but have since slipped back. On Wednesday, Brent was about $62.

Barkindo said OPEC aimed to balance supply and demand and had helped the United States by rescuing its oil industry from ultra-low oil prices.

“The oil industry is under siege globally,” Barkindo said, adding that OPEC wanted to talk more regularly to US producers to understand their industry better even if they could not participate in any OPEC-led production cuts.

In response, Hess said: “OPEC plays a very important role in stabilizing the market and those efforts need to be recognized.”

Fatih Birol, the head of the International Energy Agency, which represents industrialized nations, said most forecasts were still underestimating US oil production growth.

“There is a huge potential in the US,” Birol told Reuters, adding that the United States could raise output by another 10 million bpd in the next decade.

(NRT Digital Media/Reuters)