Energy Daily

Shale Turns Up Heat on OPEC as Big Oil Opens Its US Taps

The cartel’s adversaries this time aren’t wildcatters, but rather the world’s marquee producers.

A pumpjack near Midland, Texas. US oil production hit a record 13.5 million barrels a day, more than OPEC members Saudi Arabia and Iraq combined. — A pumpjack near Midland, Texas. US oil production hit a record 13.5 million barrels a day, more than OPEC members Saudi Arabia and Iraq combined.
Photographer: Michael Ciaglo/Bloomberg

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By Kevin Crowley

November 5, 2024 at 9:45 PM GMT+9

Welcome to our guide to the energy and commodities markets powering the global economy. Today, reporter Kevin Crowley looks at how Big Oil is challenging OPEC. Meanwhile, the UK wants to reclaim weapons used to protect Russia’s oil fleet. To get this newsletter in your inbox, sign up here.

US shale producers are turning up the heat on OPEC again — but this time the cartel’s adversaries aren’t a bunch of debt-fueled wildcatters. They’re the world’s biggest and deepest-pocketed oil companies.

Boosted by a flurry of acquisitions and focused capital expenditure, Exxon Mobil Corp., Chevron Corp. and ConocoPhillips produce a combined 3.1 million barrels of oil equivalent a day from the Permian Basin. And they’re growing fast.

Chevron said its third-quarter Permian production was 22% higher than a year earlier. Exxon Chief Executive Officer Darren Woods found “considerably higher” cost savings from the $60 billion purchase of Pioneer Natural Resources Co., potentially freeing up cash for more drilling.

ConocoPhillips forecast another decade of growth.

Together, they helped propel US output to a record 13.5 million barrels a day last month, more than the two largest OPEC members — Saudi Arabia and Iraq — combined.

Just hours after the US majors’ results, OPEC and its allies succumbed to the inevitable and pushed back a planned December production increase. With demand from China continuing to disappoint, the move effectively cedes ground to America.

The last two times the US took significant market share from OPEC, it triggered price wars in 2014 and 2020. Those fights tipped many shale producers into bankruptcy and left lingering financial scars for investors.

There are signs, however, that this time may be different.

For one, the Saudis and Russia can’t afford to flood the market and crash prices. And even if they tried, OPEC and its allies would need to sustain a longer and more financially painful supply shock to force shale companies to rein in production.

That’s because even the wildcatters of old are now in better shape. Most cleared their debts during the oil-price spike in 2022 after Russia invaded Ukraine, are merging with peers and are doubling down on efficiency gains.

It already appeared unlikely the annual OPEC-shale dinners in Houston would continue after the US Federal Trade Commission accused two senior executives of colluding with the cartel.

But now that competition for global share is back, it seems all but certain they’re a thing of the past.

--Kevin Crowley, Bloomberg News

Chart of the day

Source: BloombergNEF.
Note: PV refers to photovoltaic solar. Solar capacity expressed in direct current (DC) terms. Wind capacity includes onshore and offshore; solar and energy storage capacity includes residential, commercial, and utility-scale.

The US is on track to see at least 25% growth in clean-energy additions this coming year, according to BloombergNEF. Solar is the most-installed technology because of favorable economics and the ease of permitting relative to wind. The broader surge in renewable power will continue, with the next 11 years seeing an average of 102 gigawatts built annually, compared with 65 gigawatts last year.

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