Crude Summit: ConocoPhillips bullish on prices: Update

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ConocoPhillips predicts the recent rally in oil prices to multi-year highs will persist and US oil production will eclipse its pre-pandemic record.

"I'm pretty bullish," Ryan Lance, chief executive of the leading US independent, said today at the Argus Americas Crude Summit in Houston, Texas. "We'll have some wind in our sails with these commodity prices."

Increased demand as the world emerges from the pandemic, along with signs of tight supplies, have sent oil prices to their highest levels in eight years, though the market stumbled today in tandem with stocks. Up until now, publicly-traded exploration and production companies have held off from new drilling as they heed shareholder calls for higher returns.

ConocoPhillips became one of the top producers in the Permian basin with its $8.6bn acquisition of assets from Shell in December, which followed its $9.7bn takeover of Concho Resources in January 2021. Lance said that the US oil industry is ripe for further consolidation - given the large number of players - in order to bring down costs.

"That doesn't mean the small independents disappear," he added. "There's always going to be a business for those folks that are picking up assets from the large independent companies like mine or the integrated majors."

Further deals could be struck even with oil prices at elevated levels, Lance said.

"Clearly, it's harder to transact at these kinds of prices, but you got to be patient, you got to be persistent," Lance said.

Lance described recent moves by the US administration to curb high fuel costs by releasing supplies from the Strategic Petroleum Reserve as little more than a "band aid on a hemorrhage," that will only offer short-term relief. "Countries just weren't prepared for increasing demand coming out of the pandemic," he said.

If oil prices remain at recent levels, that will represent a "tacit call" for US production to increase again.

US output is set to climb by around 800,000 b/d this year, led by private companies with some modest growth likely by public independents. And over time, crude output will eclipse the peak set before the Covid-19 pandemic, although the rate of growth will be slower than in previous cycles, Lance said.

The Energy Information Administration (EIA) forecasts domestic crude output will advance to 12.41mn b/d in 2023, surpassing the current record of 12.3mn b/d seen in 2019.

By Stephen Cunningham