Scott Sheffield, the boss of Pioneer Natural Resources, has said that inventory and refining limitations will prevent crude oil production in the US from booming ever again.
Explaining his logic, Sheffield said to CNBC at the CeraWEEK event:
“We just don’t have that potential to grow U.S. production ever again…We don’t have the refining capacity…if we all add more rigs, service costs will go up another 20%-30%, it takes away free cash flow. And secondly, the industry just doesn’t have the inventory.”
This does not mean that US oil production will decline, however. Indeed, US oil companies like Chevron and ExxonMobil, the makers of Texaco and Mobil lubricant products, have previously announced plans to increase their US-based shale production. Sheffield therefore believes production will continue to grow modestly before plateauing at pre-pandemic levels.
EIA data indicates that the US produced 11.9 million barrels per day (bpd) of crude oil on average in 2019, which is a little under the yearly record of 12.3 million bpd that was set in 2019 prior to the COVID-19 pandemic. Sheffield said the country may match the 13 million bpd that was seen in November 2019, but expressed that it could take as long as three years to get there.
In terms of oil prices, Sheffield said he didn’t expect prices to go much lower than the current level of around $80 per barrel, pointing to the anticipated surge in demand from China as it reopens, and predicting a possible upwards price breakout in the summer.
