Speaking at a conference in Miami, John Hess, the CEO of energy company Hess Corporation, has said that OPEC is again the most prominent swing producer of crude oil in the world, putting it back “in the driver’s seat” of the global oil market.
Before 2020, shale oil production in the US grew rapidly, such that majors like ExxonMobil and BP, the makers of Mobil and Castrol grease and lubricant products, joined this revolutionary shift. The onset of the COVID-19 pandemic triggered a reversal in this trend, however, with US crude oil production dropping from a peak of 13.0 million barrels per day (bpd) in November 2019 to 10.457 million bpd in the following October.
While production has recovered somewhat since then, the industry has been unwilling or unable to quickly ramp up production this year in response to high prices and dwindling inventories. Hess believes US production will plateau at about 13 million bpd in the coming years as investors continue to shun strategies aimed at aggressive growth.
Hess said that because of this situation, OPEC had taken over shale’s role as a swing producer, adding:
“…the Saudis and the OPEC have waited this out. Now, really OPEC is back in the driver’s seat where they are the swing producer…We are in the resource business and if you are going to grow future cash flow, you have to grow your resource.”
Hess did point out, however, that even OPEC is limited in terms of its ability to increase production easily from spare capacity.