Why crude could drop below $40
houston — Oil prices will tumble to $40 a barrel if the Opec doesn’t extend its pact later this year to cut output, according to one of the most prominent producers in the shale patch.
US shale drillers are keeping an eye on the second half of the year to see if Opec and non-Opec members extend their agreement, which lasts through June, to reduce production by 1.8 million barrels a day, Scott Sheffield, chairman of Irving-based Pioneer Natural Resources, said in an interview at the CERAWeek industry conference held by IHS Markit in Houston.
“If the Opec does not extend, we will see $40 oil,” Sheffield said. “That will have a major impact on future investments in the US shale business.”
The Permian Basin of West Texas and New Mexico, which emerged as the hottest region for drilling during the 2-1/2 year downturn, would see a major curtailment of rigs at $40 a barrel, while other shale plays in the US would become uneconomic, he said. If all goes well, though, production at the field will surge to a range of eight to 10 million barrels a day over the next decade, from 2.3 million now, he said.
Vicki Hollub, chief executive officer of Occidental Petroleum, said that she sees output from the Permian eventually growing to about four to five million barrels a day. — Bloomberg