Global energy markets could face tighter inventories heading into 2024 and beyond as U.S. shale companies aren't keen to expand drilling activity, and the world's largest oil cartel isn't bolstering production.
U.S. crude oil prices have slumped by about 7 percent since hitting a 2023 high of about $95 per barrel on the New York Mercantile Exchange. Brent crude, the international benchmark for oil prices, has also trended down after flirting with $95 a barrel on London's ICE Futures exchange.
But while the march toward $100 has stalled amid rising-rate concerns, industry experts believe that crude prices will continue to hover at around $90 on tighter supplies. However, even if the energy commodity touches the triple-digit market, global financial markets shouldn't anticipate that companies will take advantage of the situation by increasing output.Rick Muncrief, chief executive of Devon Energy, recently told the Financial Times that the industry is unlikely to bolster drilling to pump more oil based on near-term price action.
"I think we are going to see continued [price] volatility," Mr. Muncrief said in an interview with the newspaper. "By nature, most of us will just say, ‘Let's stay disciplined. Let’s keep our production flat.'"
He cited the current administration's energy policies and Wall Street's attempts to direct capital away from fossil fuel projects.
Anti-Carbon Policies
Despite domestic production volumes growing over the past two months, domestic drilling activity has slowed since the end of last year.The Baker Hughes oil rig count, which measures the number of active drilling rigs in the United States and is seen as an early indicator of future production, declined to 502 for the week ending Sept. 29—down from 507 in the previous week. This is the lowest reading since February 2022 and represents the 10th consecutive monthly drop.
Last month, the White House canceled seven remaining oil and gas leases on hundreds of thousands of acres in Alaska's Arctic National Wildlife Refuge. The administration also expanded protections against future development and drilling.
The American Petroleum Institute noted that these energy production bans on federal lands and waters could threaten America's energy security, the U.S. economy, and the environment.
According to the Energy Information Administration, crude oil inventories fell by 2.224 million barrels for the week ending Sept. 29. This is down from the previous week's drawdown of 2.17 million barrels and worse than the consensus estimate of 446,000 barrels.
Gasoline supplies rose by 6.481 million barrels, distillate stockpiles tumbled by 1.269 million barrels, and heating oil inventories declined by 303,000 barrels. In addition, for the first time since the beginning of August, Cushing crude storage supplies rose by 132,000 barrels, up from the previous week's withdrawal of 943,000 barrels.
Overall crude oil inventories stand at 767.3 million barrels, down by more than 10 percent from a year ago. The Strategic Petroleum Reserve has fallen by nearly 17 percent from a year ago to 351 million barrels, while commercial stocks have slipped by 3.3 percent to 416.3 million barrels.
