The United States oil industry is set for a record-breaking year in 2024, with daily production expected to average an unprecedented 13.3 million barrels. This surge is attributed to energy giants Exxon Mobil (NYSE:XOM) and Chevron (NYSE:CVX) increasing their investments in the Permian Basin's shale resources. The projection comes on the heels of a historic milestone reached this September, when daily oil output climbed to an all-time high of 13.2 million barrels.
In a strategic shift from previous years, Exxon Mobil and Chevron are now focusing on delivering greater value to shareholders. They are reducing the proportion of earnings reinvested into production, a stark contrast to the past practice of near-total reinvestment. Currently, about half of their generated profits are being allocated towards dividends and buybacks, signaling a significant change in how these companies balance growth with investor returns.
This increase in capital expenditure budgets by the two oil behemoths is occurring alongside mega-mergers with prominent shale producers, indicating a consolidation trend within the industry. As they intensify their presence, there's also speculation about how OPEC+ might respond. Some experts have suggested that OPEC+ could potentially flood the market to challenge US shale's profitability, as it did back in 2014.
However, Rapidan Energy analysts forecast that OPEC+ will likely refrain from such tactics. Instead, they expect the coalition to depend on robust supply-demand fundamentals to maintain stable crude prices. This strategy would avoid triggering a price war and ensure a more predictable market for producers and consumers alike.
The anticipated rise in US oil production underscores the country's growing influence on global energy markets and highlights the strategic moves by major players within the sector to adapt to changing market dynamics and shareholder expectations.
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