One of the largest independent oil producers in the US has praise for Opec and Saudi Arabia, saying their approach to a recovering market is helping their American counterparts.

Speaking to the Texas Independent Producers and Royalty Owners Association on 6 April, Occidental Petroleum chief executive Vicki Hollub speculated that global demand for oil will continue to climb through the end of this year and could reach pre-pandemic levels in 2022.

But the cautious approach to raising production shown by Opec, which remains some 5 million barrels per day below early 2020 levels, will help keep prices at respectable levels while keeping pace with demand.

“I think that, instead of trying to fix a price…they’re really trying to balance demand,” she said. “They’ll continue to bring back supply, but ensure they don’t exceed 98 million (bpd). I think they’ve been brilliant in how they’re doing it and every US producer should appreciate their efforts.”

Hollub said that US producers should also follow suit when it comes to managing production to keep pace with demand, saying that “we haven’t done that very well (historically)”.

Some of the production cuts put in place last year, however, could be permanent as independents continue to restrain their budgets in order to reduce debt and satisfy investor demands for fiscal discipline.

Hollub said American production remains 2 million bpd below early 2020 levels and highs from the shale oil boom may never be replicated.

“I do believe that, even if we wanted to, it would be very hard for the US oil and gas industry to get back to over 13 million barrels of oil a day. I don’t think that’s going to happen,” she said.

“Too much investment would be required. We could plateau at around 11 million (bpd) and possibly grow slightly, but I don’t think we ever get back to 13. Ultimately, that will be healthy for our industry.”

Some of the independents with stronger balance sheets started a merger spree in the second half of 2020, and that trend has continued into this year.

Hollub said that, for the betterment of the sector, consolidation will likely continue.

“I think consolidation will continue to happen; I think it has to,” she said. “That’s another thing that will further ensure that we don’t have growth that’s out of control.”

Finance

Occidental CEO credits Opec for keeping global oil price-demand balance