US shale oil producers will not be able to increase production quickly amid rising prices due to the escalating situation in the Middle East, The Financial Times reports, citing managers and industry experts.
The International Energy Agency published a document on March 3 stating that US shale oil could become the “most significant“ source of additional resources to compensate for the shortage resulting from the crisis in the Middle East.
According to Scott Sheffield, founder of Pioneer Natural Resources, US producers will hesitate to expand production unless they are confident that high oil prices will last for a long time. He believes prices should remain at $80 per barrel for a year and a half, as they have been low in recent months, which is why producers are cutting costs.
A temporary rise in fuel prices will only lead to producers paying off debt and dividends instead of investing in production. “We also have to remember that companies are depleting their stocks of drilling equipment. I don't expect anyone to launch new drilling rigs“, Sheffield told the newspaper. JPMorgan analyst Natasha Kaneva specified that shale oil production can only increase gradually, with new capacities coming online in months.
At the same time, existing production volumes in the United States could become a stabilizing factor for both the domestic and global markets. “If it weren't for American shale oil, this would be a crisis of unimaginable proportions. "We would have witnessed a global panic," said S&P's global manager Daniel Yergin.