OPEC should boost daily output by roughly 1 million barrels over time to keep global crude supply and demand in balance as production dips elsewhere, a leading U.S. shale executive said on June 20.
U.S. shale producers and OPEC have started talking after years of acrimony, conscious that a balanced market is in their mutual interest.
With oil production dipping in Iran, Libya and Venezuela, and growth in the Permian shale Basin of West Texas and New Mexico crimped by pipeline capacity restraints, the 14-member group should step in, Scott Sheffield, executive chairman of Pioneer Natural Resource Co. (NYSE: PXD) told Reuters.
“OPEC needs to fulfil its duty,” Sheffield said on the sidelines of the OPEC International Seminar, where he was a panelist.
“They need to put together some kind of deal to phase into the market. None of us want $80 [per barrel] to $100 oil, that’s too high. There’s a sweet spot between $60 and $80,” he added.
Brent crude prices sat at roughly $75/bbl on June 20.
Sheffield will not be part of OPEC’s production negotiations on June 22, but his comments are likely to play into the group’s discussions.
Iran signaled on June 20 it could compromise on a small increase in OPEC oil output when the group meets this week, as Saudi Arabia scrambled to convince fellow members on the need for a larger rise in production.
Nigerian Oil Minister Emmanuel Ibe Kachikwu said in a brief interview that Sheffield’s comments were “helpful but also alarming.”
“The concern shouldn’t be tightness in the market. That’s a very short-term issue. It could be followed by a surplus in the market over the next 10 years,” Kachikwu said.
Kachikwu’s concerns were echoed by Total (NYSE: TOT) CEO Patrick Pouyanne, who warned that pipeline constraints crimping supply in the shale industry are a short-term concern that will be fixed as new pipes are built.
“The shale oil is not there because you have some bottlenecks on the infrastructure but it will come end of next year. Don't forget it, it will come,” said Pouyanne, also a seminar panelist. France-based Total does not operate U.S. shale wells.
Pioneer itself has enough pipeline capacity for all of its Permian production. The company is rapidly boosting output, pumping 312,000 barrels of oil equivalent per day (boe/d) with plans to pump 1 MMboe/d by 2026.
“I think the U.S. has great potential to increase its production,” said Bob Dudley, CEO of U.K.-based BP Plc (NYSE: BP), which operates shale wells across the U.S. “It does so without a central plan. It responds to the market.”
That Sheffield even came to the OPEC event surprised some market observers. U.S. antitrust law prohibits U.S. producers from making any output agreement or from working with OPEC members.
Sheffield and Hess Corp. (NYSE: HES) CEO John Hess were the only U.S. shale executives to attend after three of their shale peers pulled out.
Brenda Schroer previously served as senior vice president, CFO and treasurer of Concho Resources, where she oversaw the company’s ESG reporting.
George Millas joins EPIC Midstream as chief commercial officer from Energy Transfer, where he was in charge of all the company’s commercial gathering and processing in the Permian Basin.
Pioneer Natural Resources said the acquisition of DoublePoint Energy will increase Pioneer’s acreage position to greater than 1 million net acres in the Permian Basin with no exposure to federal lands.