* OPEC is seeing U.S. tight crude output fall this year
* Chesapeake boss says story now needs ‘different mindset’
* Lack of coal recycling may help OPEC regulate -OPEC market sources
LONDON / HOUSTON, Feb 22 (Reuters) – OPEC and U.S. oil companies will see a limited reversal in coal oil supply this year as major U.S. producers freeze production despite prices rising, a decision that would help OPEC and its allies.
OPEC this month cut its 2021 forecast for U.S. crude crude, another term for coal, and output is expected to decline by 140,000 barrels per day to 7.16 million bpd. The U.S. government expects coal production in March to fall by about 78,000 bpd to 7.5 million bpd.
OPEC’s forecast was ahead of freezing weather in Texas, home to 40% of U.S. production, which has closed wells and reduced demand by regional oil refineries. Lack of coal recycling could make it easier for OPEC and its allies to regulate the market, according to OPEC sources.
“This should be it,” said one of the OPEC sources, who declined to comment. “But I don’t think this factor will be permanent. ”
While some U.S. energy companies have increased drilling, production is expected to remain under pressure as companies cut costs to reduce debt and boost shareholder yields. Shale producers are also careful that more drilling would be carried out quickly with OPEC returning more oil to the market.
‘FURTHER INFORMATION’
“In this new era, (coalstone) needs a different mindset,” Doug Lawler, chief executive of Chesapeake Energy Corp.’s coal-fired pioneer, said in an interview this month. “It needs more control and responsibility to create money for our stakeholders and shareholders.”
That sentiment would be a welcome development for the Petroleum Exporting Countries Organization, where the 2014-2016 price slump and global glut were partly caused by rising coal production in an uncomfortable experience. This led to the creation of OPEC +, which began cutting output in 2017.
OPEC + is currently halting slower product invitations made last year due to falling prices and demand due to the pandemic. Alliance members will meet on March 4 to review an application. For now, he doesn’t see history repeating itself.
“The US stone is the main non-OPEC supply in the last 10 years or so,” said another OPEC representative. “If growth restrictions like this are expected, I see no concern as producers elsewhere can meet any demand growth. ”
However, OPEC is in no hurry to open the taps. Saudi Arabian Energy Minister Prince Abdulaziz bin Salman said on February 17 that oil producers must be “very careful.”
$ 60 OIL HELP
Coal production generally responds quickly to price signals and U.S. crude has reached this month’s peak since January 2020, climbing $ 60 per barrel.
While shale companies have added more rigs in the past few weeks, a resurgence in tight demand and pressure from investors to reduce debt has kept them from running to complete new wells. .
“At this price point, any oil production is profitable, especially at the high cost of U.S. shale,” said Stephen Brennock of PVM Oil Associates broker.
“But despite these positive growth signals, U.S. tight oil production is far from recovering in the pre-COVID mojo.”
Pioneer Natural Resources Co., chief executive officer of coalstone producer Scott Sheffield, recently said he expects small companies to increase production but in total U.S. output it will be flat to 1% higher even at $ 60 per barrel.
FREE PRODUCTION
Last week’s severe cold will wreak havoc on oil and gas production as companies deal with frozen equipment and a lack of power to run activity. The largest U.S. independent producer, ConocoPhillips, said Thursday that most of its production in Texas was still offline.
But JP Morgan analysts said in a February 18 report that rising oil prices could accelerate coalstone recovery.
“As long as operators have enough drill inventory to complete, they should be able to easily grow productivity while monitoring a capex,” the bank said, using a term for drill wear.
Such projections for 2022 from the U.S. Energy Information Administration are for further U.S. supply growth, although there may not be enough to cause problems for OPEC + for now.
“U.S. oil production will never return to pre-COVID levels any time soon,” said Brennock at PVM. “But that’s not to say that the US stone will not return one day as a thorn in the side of OPEC.” (With Alex Lawler in London and Jennifer Hiller in the Houston Edition with Gary McWilliams and Matthew Lewis)