Scott Sheffield, CEO of Pioneer Natural Resources, a major US shale oil producer, stated at the CERAWeek energy conference held in Texas this week that oil prices have hit bottom and could surge 17% by summer. In an interview, Sheffield said that over the past year ending in December, US production growth was only about half of what was expected and the industry has been facing ongoing issues of declining refinery capacity and inventory.
Over the past few months, the price of West Texas Intermediate (WTI) crude oil has fluctuated around $73-80 per barrel. On Thursday of this week, WTI crude oil prices hovered around $77 per barrel, while Brent crude oil prices were around $83 per barrel.
Sheffield expects oil production growth to slow significantly, although not necessarily to decline, due to the constraints of refinery capacity and inventory. According to the US Energy Information Administration (EIA), the US produced an average of 11.9 million barrels of crude oil per day in 2022, lower than the record average of 12.3 million barrels per day in 2019. EIA predicts that daily oil production will be 12.4 million barrels per day this year.
Sheffield believes that the US may recover to a production level of around 13 million barrels per day in two to three years, which is equivalent to the level recorded in November 2019. He added that this will be a "very slow pace."
There are two reasons for the slow growth in US crude oil production: insufficient refinery capacity and limited inventory. Sheffield pointed out that "first, we don't have refinery capacity. If we increase drilling, service costs will rise another 20-30%, which will take away free cash flow. Second, this industry does not have enough inventory."
He added, "Our estimate of free cash flow last year was $8 billion, and we expect free cash flow in 2023 to be only $4 billion."
As for when oil prices will rise, Sheffield expects that "at some point this summer, WTI will break through $80 and move towards $90 per barrel."
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Over the past few months, the price of West Texas Intermediate (WTI) crude oil has fluctuated around $73-80 per barrel. On Thursday of this week, WTI crude oil prices hovered around $77 per barrel, while Brent crude oil prices were around $83 per barrel.
Sheffield expects oil production growth to slow significantly, although not necessarily to decline, due to the constraints of refinery capacity and inventory. According to the US Energy Information Administration (EIA), the US produced an average of 11.9 million barrels of crude oil per day in 2022, lower than the record average of 12.3 million barrels per day in 2019. EIA predicts that daily oil production will be 12.4 million barrels per day this year.
Sheffield believes that the US may recover to a production level of around 13 million barrels per day in two to three years, which is equivalent to the level recorded in November 2019. He added that this will be a "very slow pace."
There are two reasons for the slow growth in US crude oil production: insufficient refinery capacity and limited inventory. Sheffield pointed out that "first, we don't have refinery capacity. If we increase drilling, service costs will rise another 20-30%, which will take away free cash flow. Second, this industry does not have enough inventory."
He added, "Our estimate of free cash flow last year was $8 billion, and we expect free cash flow in 2023 to be only $4 billion."
As for when oil prices will rise, Sheffield expects that "at some point this summer, WTI will break through $80 and move towards $90 per barrel."
The market is changing rapidly, I hope everyone can seize the opportunity and make money
The personal free guidance channel is open for a limited time, you are welcome to join
