The U.S. shale industry responds only to oil price signals and is like “a market without brain”, BP’s chief executive Bob Dudley said on Tuesday.
“The U.S. is the only country that completely responds to market signals … like a market without a brain. It just responds to price signals,” Reuters quoted Dudley as saying at the ongoing International Petroleum Week conference in London.
“Unlike Saudi Arabia and Russia, which adjust their output in response to gluts or shortages in oil supplies, the U.S. shale market responds purely to oil prices,” said the CEO of the UK oil supermajor, which completed last year a US$10.5-billion deal to buy U.S. shale assets from BHP in what was BP’s biggest acquisition this century, and one that BP will rely on for boosting production and margins.
The acquisition adds oil and gas production of 190,000 barrels of oil equivalent per day (boe/d) and 4.6 billion oil equivalent barrels (boe) of discovered resources in the liquids-rich regions of the Permian and Eagle Ford basins in Texas and in the Haynesville natural gas basin in East Texas and Louisiana, BP says.
The U.S. shale sector is sensitive to oil prices and drillers respond to them by adding or reducing working rigs, also because shale production is shorter-cycle and easier to switch on and off than complex conventional oil projects.
While OPEC and its Russia-led allies have been looking for two years now at supply and demand and adjusting production to avoid another oil glut similar to the one that crashed oil prices in 2014, U.S. shale has been benefiting from the OPEC/non-OPEC coordinated market action and the increase in oil prices over the past two years. Producers have been pumping record amounts of crude oil in the United States, which is already the world’s top oil producer ahead of Russia and Saudi Arabia.
U.S. crude oil production hit a record 12 million bpd in the week ending February 15, rising by 100,000 bpd from 11.9 million bpd in the previous week, EIA data showed last week.
By Tsvetana Paraskova