OPEC and U.S. oil companies see a limited rebound in shale oil supply this year as top U.S. producers freeze output despite rising prices, a decision that would help OPEC and its allies.
OPEC this month cut its 2021 forecast for U.S. tight crude, another term for shale, and expects production to decline by 140,000 barrels per day to 7.16 million bpd. The U.S. government expects shale output in March to fall about 78,000 bpd to 7.5 million bpd.
The OPEC forecast preceded the freezing weather in Texas, home to 40% of U.S. output, that has shut wells and curbed demand by regional oil refineries. The lack of a shale rebound could make it easier for OPEC and its allies to manage the market, according to OPEC sources.
“This should be the case,” said one of the OPEC sources, who declined to be identified. “But I don’t think this factor will be permanent.”
While some U.S. energy firms have increased drilling, production is expected to remain under pressure as companies cut spending to reduce debt and boost shareholder returns. Shale producers also are wary that increased drilling would quickly be met by OPEC returning more oil to the market.
OPEC+ is in the process of slowly unwinding record output curbs made last year as prices and demand collapsed due to the pandemic. Alliance members will meet on March 4 to review demand. For now, it is not seeing history repeat itself.
Still, OPEC is no rush to open the taps. Saudi Arabian Energy Minister Prince Abdulaziz bin Salman said on Feb. 17 oil producers must remain “extremely cautious.”
