OPEC is likely to cut oil production again, the CEO of Pioneer Natural Resources said at a Goldman Sachs conference in Miami on Thursday.
“Saudi Arabia is not going to let Brent stay around $75 a barrel,” Scott Sheffield said, adding that he wouldn’t be surprised “if they have another cut.”
Sheffield believes oil futures will remain bearish going forward because “there is no liquidity in the market.” No one is hedging, Sheffield said, so there’s nothing to push up forward prices.
As for where Pioneer’s CEO sees oil heading, Sheffield sees the $80-per-barrel mark as a base, with potential upwards of $150.
Back in the United States, Sheffield saw production from the most prolific US shale basin, the Permian, eventually reach 7 million barrels per day. But once this volume is reached, it will plateau, with only Chevron, Pioneer and Conoco having the ability to produce more than one million barrels of oil equivalent per day in the Permian by 2030. However, this will be achieved with flat or declining – the platform counts as service prices run at what Sheffield considers unbearably high.
BMO Capital Markets said last month that more than two-thirds of the Permian’s prime land has already been drilled, leaving oil companies scrambling for permits below the Midland. World Oil cited unnamed analysts who predicted that the Permian could reach a plateau within five years, with the Permian’s two main zones pumping out less oil per foot of each new well drilled.
According to research firm Enverus, U.S. shale, carried mostly from the Permian, has provided 90 percent of the growth in oil production in the United States over the past ten years. This slowdown in US crude production and the prospect that US shale can no longer respond quickly to changing market conditions have encouraged OPEC. The Saudi-led group probably now thinks it can keep prices high without a production response from the United States, Bank of America said last month.
By Julian Geiger for Oilprice.com
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