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OPEC crude output cuts should help US shale profits in 2021

U.S. crude oil production has fallen 2 million barrels per day in the last year as low prices and demand forced shale producers to cut their losses. Investors had already been pressuring the industry to curb spending and boost returns before the pandemic hit. Shale output was quickly cut, but might return quickly if prices keep rising.

On Tuesday, Saudi Arabia, the world's biggest oil exporter, said it would voluntarily reduce its production by 1 million barrels per day (bpd) in February and March, after Russia pushed to increase output, worried about U.S. shale capitalizing on the group's cuts.

Russia and Kazakhstan will increase their output, reluctant to cede market share to the United States. Overall, OPEC+ had been due to restore 500,000 bpd in each of the two months. Saudi officials were concerned new increases would outpace demand during new coronavirus lockdowns. Prices for West Texas Intermediate on Friday topped US$52 per barrel, and the 12-month futures' price, which producers use to plan spending on new wells, hit US$51.37 a barrel, up from US$44.63 at the start of December.Higher crude prices will fall directly to U.S. producers' bottom lines given recent cost cuts and commitments to keeping output flat. Companies pledged to keep production flat and use any price increases to boost investor returns or pay down debt. Energy executives in Colorado, Oklahoma, Wyoming and northern New Mexico in a Federal Reserve Bank of Kansas City poll released Friday the said oil prices would have to average US$56 per barrel for them to substantial increase drilling//CNA