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Major shale drillers fear that the $100-a-barrel price of crude oil will tempt undisciplined rivals to expand production and create a new supply glut
.
With global crude demand expected to outpace production this year, Pioneer Natural Resources CEO Scott Sheffield is poised to range oil prices from $75 to $100
.
U.
S.
crude oil prices have been above $75 for the past week and a half, briefly rising to nearly $85 at the end of October
.
"I want it to stay there," Sheffield said
Wednesday during a webcast of Goldman Sachs' energy conference.
Prices close to $110 or $120 "don't help
our industry.
" ”
It may seem counterintuitive for oil executives to express anxiety about triple-digit oil prices, but it symbolizes a new mantra that favors stable cash flow and greater shareholder returns
.
While drilling and fracking in U.
S.
fields showed no signs of slowing down at the end of 2021, publicly traded explorers in the world's largest shale region stood firm on promises to curb production growth and return more cash
to investors.
Executives at Diamondback Energy Inc.
and Devon Energy Corp.
said in webcasts that they needed a firm nod from shareholders before increasing production again
.
The oil industry has yet to fully recover from the devastating effects of successive oil depressions and pandemics on energy demand
.
Goldman Sachs warned last month that oil prices could break the $100 mark
in 2023 due to record demand.
Meanwhile, Ed Morse, head of global commodity research at Citigroup, said any sharp rise in crude oil prices would be short-lived
.
Travis Stice, CEO of Diamondback, agrees that oil prices above $100 are bad for the industry because it could be seen as a signal
that production is growing again.
But now, he said, shareholders still say they don't want to see oil explorers boost production
.
"18 months ago, we were in the global apocalypse of the energy industry, and now you're talking about excess returns," Stice said
.
"We should all stop and recognize the structural shift
in capital allocation.
"
