US explorers have pledged to keep a lid on production, even as crude rebounds amid OPEC supply cuts and the outlook for a recovery from the pandemic-driven global economic collapse.
But one energy investor said he sees “zero value” in producers’ promises of frugality. Explorers’ discipline won’t last as oil extends a recovery from historic lows to trade at more than $50 a barrel, a level at which many shale wells are profitable, said Charles Lemonides, founder of Valueworks LLC, which has about $200 million in assets under management.
“Discipline will stay for a few months, maybe the next quarter or two before they start going at it again,” said Lemonides, whose firm holds shares in producers including Whiting Petroleum Corp and Oasis Petroleum Inc. “There’s a lot of equipment and expertise ready to be put to work.”
How the fragmented US shale industry will respond to increased incentives to drill has become a crucial question for traders and industry watchers across the world.
Though OPEC and Russia have kept their output in check thusfar and oil leasing on federal land has halted, crude demand is languishing well below pre-COVID levels as lockdowns persist. A sharp uptick in shale supply could send prices plummeting again. For more information visit www.opec.org
