Muted increases in U.S. oil production and cuts by the OPEC+ producing-nations group will limit crude supply in the months ahead, pushing up prices, an executive at U.S. shale producer EOG Resources said on Wednesday.
U.S. energy firms have cut domestic oil and gas drilling activity to the lowest level since April 2022 with declines from Texas to Pennsylvania. Analysts expect further cuts this year with oil and gas prices off from last year’s strong levels.
“We’re a short term away from seeing the market tighten even further,” EOG’s chief operating officer, Lloyd Helms, said at a JP Morgan energy conference. “We are more constructive on where oil prices could go.”
U.S. natural gas prices also could be supported this year by fewer drilling rigs in shale-gas basins at a time when liquefied natural gas (LNG) demand is expected to peak, Helms said.
Global benchmark Brent crude was trading at $77.10, while U.S. natural gas prices were trading around $2.58 per million British thermal units. Brent futures traded at $85.91 at the end of last year.
Saudi Arabia plans a cut of 1 million barrels per day to its output in July, on top of new efforts by the Organization of the Petroleum Exporting Countries and allies to limit supply into 2024 to stabilize oil prices.
U.S. oil production growth will rise only 1.3% to 12.77 million barrels per day next year, after a 6.1% gain this year, according to estimates from the U.S. Energy Information Administration. Output from the top shale region, the Permian Basin of Texas and New Mexico, has also been waning.
Helms said the Permian Basin was not an area where the company aims to expand activity, citing labor and service constraints. It expects to flatten drilling activity there and turn more to Ohio’s Utica and Wyoming’s Powder River Basin, he added.
(Reporting by Arathy Somasekhar in Houston Editing by Matthew Lewis)