Crude oil production in the US hit an all-time high on October 12, 2023, with 13.2 million barrels per day marking the complete elimination of losses from the coronavirus era.
The news came a day after a $60 billion deal between Exxon Mobil and Pioneer Natural Resources that puts the US oil giant in control of the largest US oil field.
The big move in energy stocks in 2021 and 2022 has largely signaled a recovery from a disastrous decade for Big Oil, in which tens of billions of cash were lost to unprofitable fracking drilling. It has followed a path of consolidation that has been good for corporate earnings, dividends and shareholder returns.
The reset
So what led to the return of Big Oil? On the one hand, renewed demand for oil as the global economy restarts after the coronavirus lockdowns and higher prices of black gold, factors that have led to renewed investor interest in the oil sector. The strengthening of domestic production in the US is mainly located in certain states such as Texas, where relaxed environmental regulations and good interconnection with the pipeline network lead to an increase in investment.
Boosting revenue enables oil companies to spend their boosted revenue on increased dividends and share buybacks.
At the same time, agreements such as the recent acquisition of Pioneer by Exxon Mobil are considered to lead to an increase in the efficiency of the existing fields.
These developments lead to a partial strengthening of the domestic versus international production activities of the energy giants – all the more so as the safety factor ranks higher and higher on their list of priorities.
The war in the Middle East
As for developments in the Middle East, with the Israel-Hamas conflict, experts do not believe that they will have a significant impact on the price of oil – unless sanctions are imposed on Iran.
However, in any case, and despite any short-term upward trends, in the long term oil companies are certain to be faced with an overall decline in oil consumption. It is estimated that consumption will peak in 2030, and then begin to decline.
Even then, however, oil will still be used in other sectors than energy, such as in the chemical industry or plastics.
