RE:RE:Q2 Shale CEOs: shale not increasing output (Bloomberg)It could be going forward shale sets the floor for WTI price.
From ~2012 to Covid shale companies were working like some communist collective where the idea is maximum production with no regard to profitability. They managed to keep the price of oil low by burning through investor's cash to keep the oil flowing. A lot of shale investors got burnt badly by this undisciplined behavior. People like Art Berman kept pointing out shale was using more money than it was generating yet this self-defeating behavior continued for some time and oil was relatively unprofitable for them when oil was bouncing between $40 and $60 2015 to Covid.
For many years all oil producers all seemed to just go balls to the wall on production. For years OPEC was a joke because every time they set a quota everyone would cheat. Then around 2008 OPEC got disciplined and member actually started to produce to quota only. Perhaps shale got a lesson from them. I could never understand oil producers who were going full out when oil was $40 -$50 when everyone knows they could make more money by producing less.
Nowadays shale is making good profits because the investors demanded it. That won't change. I read $90 is perhaps the sweet spot for shale where they can make a good profit. With the high decline rate of shale if CEO’s start to postpone wells below $90 WTI US production will fall very quickly also correcting the price quickly. .
So it's possible the nature of shale allows shale companies to continue to set the price of WTI only now they put a floor rather than destroying the price. Shale investors will revolt if WTI price falls into the $60 range and the drillers just keep adding wells. I think those days are over.US shale production is too big a piece of world supply to ignore. If they cut back the price will rise .Actually if they just keep output steady from here prices will also rise because there will be nothing to replace the SPR when that stops this fall.
So my belief is between shale and OPEC there will be a floor on oil prices. We may actually be there, or near there, right now.