March 11, 2019 / 4:18 PM / 7 months ago

UPDATE 2-CERAWEEK-U.S. oil output could be less volatile as majors boost shale share -IEA

(Adds details on price sensitivity)

By Collin Eaton

March 11 (Reuters) - U.S. oil production could become less responsive to crude prices as major oil companies expand operations in the nation’s shale fields, now dominated by smaller producers, International Energy Agency officials said at an industry summit on Monday.

Forecasts by majors Exxon Mobil Corp and Chevron Corp for strong production growth in the Permian Basin, the nation’s largest oil field, signal a greater shift in U.S. shale output to the world’s oil majors, which could mean more stable U.S. output, said Toril Bosoni, a senior analyst at Paris-based IEA.

“These major companies have longer-term strategic plans,” Bosoni said at the CERAWeek energy conference in Houston. “Their balance sheets mean they can continue to invest even if prices fall, for a short period of time.”

The two biggest U.S. oil companies last week boasted of their prowess in shale to lure investors, releasing dueling projections that, if realized, would cement the pair as the dominant players with one-third of Permian production potentially under their control within five years.

The United States is now the world’s largest producer of crude, thanks to the boom in shale, with record output of more than 12 million barrels per day, according to U.S. government figures.

U.S. production has risen by about 2 million bpd in the last year alone, a faster-than-expected surge that added to ample global supplies and contributed to a drop in international crude prices from above $86 a barrel in October to about $50 a barrel in December. Global benchmark Brent increased 91 cents to $66.65 a barrel on Monday.

The nation’s output gains has been sensitive to rising and falling prices over the last few years. Led by independent producers, shale production climbed rapidly when the domestic U.S. crude benchmark hovered above $100 a barrel in 2013 and 2014, and fell sharply when prices collapsed thereafter.

Since prices dropped in October, U.S. independents have idled 41 oil drilling rigs, bringing the nation’s oil rig count to 834, the lowest level in 10 months, according to General Electric Co’s Baker Hughes energy services firm.

In recent years, the United States has been called the world’s “swing producer” by some analysts, referring to the ability of its shale output to react swiftly to prices. But oil majors would be slower to react to prices than independents, Bosoni said.

“We do expect them to take a bigger share as they go forward,” she said. (Reporting by Collin Eaton Editing by Marguerita Choy)

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