At a JP Morgan energy conference, EOG’s chief operating officer, Lloyd Helms, warned that the market was on the verge of becoming even tighter.
An executive at US shale producer EOG Resources (EOG.N) said on Wednesday that muted increases in US oil production and cuts by the OPEC+ producing-nations group will limit the supply of crude in the months to come, driving up prices.
With decreases from Texas to Pennsylvania, domestic oil and gas drilling activity has been reduced by U.S. energy companies to the lowest level since April 2022. As oil and petrol prices have fallen from their high levels from last year, analysts anticipate further reductions this year.
At a JP Morgan energy conference, EOG’s chief operating officer, Lloyd Helms, warned that the market was on the verge of becoming even tighter. “We are more optimistic about the potential direction of oil prices.”
At a time when demand for liquefied natural gas (LNG) is anticipated to reach its peak, Helms said, fewer drilling rigs in shale-gas basins could also support U.S. natural gas prices this year.
The price of Brent crude, the benchmark for all markets, was trading at $77.10, while the price of natural gas in the United States was hovering around $2.58 per million Btu. At year’s end, Brent futures were trading at $85.91.
Along with new initiatives by the Organization of Petroleum Exporting Countries and allies to limit supply through 2024 in order to stabilise oil prices, Saudi Arabia plans to reduce its output by 1 million barrels per day in July.
The U.S. Energy Information Administration predicts that after increasing by 6.1% this year, the country’s oil production will only increase by 1.3% to 12.77 million barrels per day the following year. The Permian Basin of Texas and New Mexico, which produces the most shale, has seen a decline in output as well.
According to Helms, the company does not intend to increase activity in the Permian Basin due to labour and service shortages. According to him, drilling activity is anticipated to level off there and shift more towards the Powder River Basin in Wyoming and the Utica in Ohio.