Industry executives: U.S. shale oil growth slowing OPEC has returned to dominance

Local time on Thursday, at an investor conference in Miami, Florida, U.S. Energy CEO John Hess said that the Organization of Petroleum Exporting Countries (OPEC, or OPEC), the largest regulator of production, has returned to dominance in the episode of slowing growth in U.S. shale oil.

The so-called production regulator (Swing Producer), usually refers to a commodity or oligopoly suppliers, control its global reserves and has a large amount of idle capacity. Swing producers are able to increase or decrease supply with minimal additional internal costs, thereby influencing prices and balancing markets. More typical production regulators include Saudi Arabia's oil, Russia's potash and, historically, De Beers' diamonds.

Hess expects U.S. oil production to reach about 13 million barrels per day in the next few years and then level off. Earlier this year, U.S. oil capacity growth has been lower than expected because investors are more concerned about returns than growth, and inflation and inventory depletion have taken their toll. The U.S. Energy Information Administration (EIA) last week lowered its 2023 shale oil production growth forecast by 21 percent.

Hess said, "Shale oil is seen to play the role of a regulator of production, and Saudi Arabia and OPEC have been waiting for that to end, and now OPEC is really back in the driver's seat as a regulator of production." However, he also warned that OPEC lacks the idle capacity to easily increase production.

Concerned about the recession, OPEC+, led by Saudi Arabia and Russia, announced last month a 2 million bpd cut in oil production capacity. hess noted that the move was not only a political swipe at U.S. President Joe Biden, but also an economic move. Biden has been trying to pressure OPEC to increase production in order to lower energy prices due to high domestic inflation in the United States.

Saudi Arabia's refusal to increase production has also stalled relations with the Biden administration, with Biden threatening to make the Saudis pay for it and some U.S. congressmen accusing the Saudis of aligning themselves with Moscow and threatening that the U.S. could stop arms sales to Saudi Arabia.

U.S. Senate Majority Leader Schumer even said he was considering using the Anti-Oil Production and Export Cartel Act (or NOPEC) to counter OPEC's actions.