Rising prices boost driller confidence: Nymex benchmark oil has gained nearly 35% in past four months after OPEC and its alliance cut production to strike a balance between supply and demand .
The Permian Basin, the most prolific piece of shale in the United States, will produce crude oil at levels not seen since the start of the pandemic in the latest sign that the global economy is warming.
Rising prices boost the confidence of drillers. Benchmark oil Nymex has gained nearly 35% in the past four months after OPEC and its alliance cut production to strike a balance between supply and demand.
Fossil fuel is also seeing an increase as Covid-19 vaccinations progress and Americans travel again, which increases gas mileage.
Production in the basin will hit 4.466 million barrels per day in May, the maximum in a year, and the number of rigs has hit a one-year high, according to the latest data from the Energy Information Administration. By comparison, production peaked at more than 13 million barrels a day last year before the global pandemic crushed oil prices, forcing many drillers to file for bankruptcy and shut down wells.
The increase also comes from explorers trying to complete drilling and finishing wells that have been disrupted by the extremely cold weather that swept across the southern United States last month, while trying to meet targets. for this quarter, said Artem Abramov, head of shale research for Rystad Energy. The company’s own supply estimates for next month are slightly higher than the government’s forecast.
Before the February interruptions, production in the Permian recovered, with drillers finishing wells at 57% of their pre-pandemic speed, or about 250 per month. The patch is expected to get back on track for growing production if producers can maintain the current momentum, BNEF analyst Tai Liu said in a note to customers last week.
But growth in shale plots in the United States will likely be tamed by producers seeking to limit spending in line with promises made to shareholders to increase dividends instead of supply.
“It would be very difficult for the US oil and gas industry to come back to over 13 million barrels per day. I don’t think that will happen, ”Occidental Petroleum Corp. CEO Vicki Hollub said at a conference Tuesday. “Too much investment would be needed.”