Page 4 - NorthAmOil Annual Review 2021

NorthAmOil COMMENTARY NorthAmOil

Shale drillers wary

of rising oil prices

Some of the US’ leading shale producers have

expressed concern over the possibility of crude

prices rising above $100 per barrel

US SOME of the US’ leading independent shale happen if oil prices do reach $100 per barrel any
drillers have raised concerns over the possibility time soon – a level that looks increasingly possi-
WHAT: of crude prices rising above $100 per barrel, and ble again. The worry is that not all shale drillers
Certain leading shale the impact this could have on their industry. will remain disciplined and that some will ramp
drillers are concerned This comes as West Texas Intermediate prices up drilling as prices rise, helping to create a new
that oil prices rising crept up towards $80 per barrel in the first week supply glut.
above $100 per barrel of January – up from around $50 per barrel a Crude demand is being forecast to outpace
could have negative year ago. And while $100 per barrel prices still production, possibly this year or next, as the lack
implications. appear to be some way off, the possibility of of recent exploration and reserve replacement
these levels being reached is increasingly being begins to catch up with the global oil industry.
WHY: discussed. Prices already briefly reached $85 per barrel in
Stronger prices Shale dynamics have shifted considerably October 2021, and could rise to that level, or
could encourage less since the mid-2010s, when a larger pool of higher.
disciplined producers unconventional drillers contributed to an oil Pioneer Natural Resources’ CEO, Scott Shef-
to drill more, thus glut that led to crude prices collapsing. A sub- field, said that he expected the oil price to be in
contributing to a new glut sequent recovery was also undermined when the $75-100 per barrel range.
of crude. shale production rose steadily in tandem with “I hope it stays there,” Sheffield said during a
prices. Following the onset of the coronavi- Goldman Sachs Group energy conference web-
WHAT NEXT: rus (COVID-19) pandemic, though, many of cast on January 5, adding that prices approach-
WTI prices remain below the producers that survived both downturns ing $110 or $120 per barrel are “not going to
$80 per barrel but some in recent years appear to be proceeding more help” the shale industry.
analysts have warned cautiously as their shareholders continue to Diamondback Energy’s CEO, Travis Stice,
they could rise. demand financial discipline. agreed that crude prices above $100 per barrel
would be detrimental to the industry, as they
Price concerns could be seen as a signal to ramp up output
Nonetheless, some major shale producers again. He added, though, that shareholders still
have discussed their concerns over what could did not want shale drillers to raise production.

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