Bloomberg cited recent comments by ConocoPhillips (NYSE: COP ) CEO Ryan Lance that rising costs as well as tight supplies of labor and equipment were some of the problems that have hampered efforts by U.S. shale producers to quickly ramp up output. . But Bloomberg notes that the biggest factor behind the slowdown is a shift in the playbook by most U.S. shale companies from a focus on growth and expansion to more capital discipline and returning more cash to shareholders. Those bearish forecasts will not please President Biden, who has repeatedly called on US producers to boost production in an effort to lower fuel prices. However, they are definitely bullish on oil prices, given that OPEC+ is set to cut production by 2 million barrels per day from November and China has eased Covid-19 restrictions. An opposing view But commodities analysts at Standard Chartered beg to differ, arguing that US crude oil supply and shale oil supply have yet to peak. According to StanChart, total U.S. oil liquids supply surpassed a pre-pandemic high in July, with higher production of natural gas liquids (NGLs) and other liquids offsetting lower crude oil production. Analysts have further forecast US crude production to exceed 13 mb/d by June 2024. StanChart has not provided information on how they arrived at this decidedly bullish projection for US crude production. Source: Standard Chartered Current indications on US crude supply are mixed. After stalling for months, U.S. drilling and fracking activity has started to pick up with the current rig count at 779, or 223 rigs higher than a year ago. However, EIA data showed production per rig fell to 966 barrels per rig per day in November compared with 980 barrels per rig in September. In addition, the large decline in drilling rigs (DUC) from 8,900 at its peak in 2019 to 4,333 currently shows that many shale companies are so far reluctant to return to the happy drilling day and are mostly retreating. DUC stocks. Most alarmingly, oil exploration has actually plummeted not just in the US but around the world. A recent report by Rystad Energy revealed that there will only be 44 oil and gas lease rounds worldwide this year, the fewest since the year 2000 and a far cry from the record 105 rounds in 2019. According to the Norwegian energy player, only two new blocks had has been licensed to drill in the US since late August this year, with no new offers for oil and gas leases from the Biden administration itself. Indeed, the few auctions that took place under Biden or entered his presidency were decided during the presidency of Donald Trump. Meanwhile, Rystad revealed that Brazil, Norway and India are the global leaders in terms of new licenses. Such low levels of exploratory interest are not sustainable and may come back to bite the world soon. A year ago, Rystad Energy warned that Big Oil could see its proven reserves run out in less than 15 years, thanks to produced volumes not being fully replaced by new discoveries. According to Rystad, proven oil and gas reserves from the so-called Big Oil companies, namely ExxonMobil (NYSE: XOM ), BP Plc. (NYSE: BP ), Shell Plc (NYSE: SHEL ), Chevron (NYSE: CVX ) are falling sharply as produced volumes are not fully replaced by new discoveries. Only TotalEnergies (NYSE: TTE ) and Eni SpA (NYSE: E ) have avoided declines in proved reserves over the past decade. ExxonMobil, whose proven reserves shrank by 7 billion boe in 2020, or 30%, from 2019 levels, was hit hardest after significant declines in Canadian oil sands and US shale gas holdings. Shell, meanwhile, saw its proved reserves fall 20% to 9 billion boe last year. Chevron lost 2 billion boe of proved reserves due to impairment charges while BP lost 1 boe. The main culprit: The rapid contraction of exploration investment. Global oil and gas companies have shed their capitalization by a staggering 34% in 2020 in response to shrinking demand and investors worried about the sector’s persistently low returns. Capex is expected to grow only ~12% this year. It may be years before oil executives (and investors) have enough confidence to return to pre-pandemic drilling levels. By Alex Kimani for Oilprice.com More top reads from Oilprice.com:
