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Major shale player says oil prices in OPEC’s hands

Pioneer Natural Resources, one of the biggest US shale operators, has said that the US shale patch will not have a big say in which direction oil prices go, with it being mostly determined by the OPEC+ group of countries.

The recent shale revolution saw the US become the world’s biggest oil producer, but following the onset of the COVID-19 pandemic, combined with pre-existing oversupply issues, US shale operators cut back production significantly in response to market forces. Since then, they have shown a level of restraint not seen before in the industry, even though WTI Crude has traded above $60 for over half a year now.

Rather than risk overproduction again, operators are prioritising healthier balance sheets and dividends in order to attract investors, rather than growing production too soon.

Pioneer Natural Resources CEO Scott Sheffield explained this situation to the Financial Times:

“Everybody’s going to be disciplined, regardless whether it’s $75 Brent, $80 Brent, or $100 Brent. All the shareholders that I’ve talked to said that if anybody goes back to growth, they will punish those companies.”

Large companies like ExxonMobil and Chevron, the maker of Texaco lubricant products, also announced they would take a slow path to recovering production in the shale patch. ExxonMobil CEO Darren Woods said earlier in the year that the company would, rather than invest in new drilling, use profits to reduce debt in the near term.

Nevertheless, both companies will likely boost spending in their Permian operations next year if demand continues to hold up.

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