Oil’s price slide threatens US shale production: Marathon Oil CEO
Could see slowdown in drilling if prices don’t turn around: Marathon CEO
Marathon Petroleum CEO Gary Heminger on OPEC and the potential impact of declining oil prices.
Signs of weakness in U.S. shale production are beginning to rear their ugly heads amid low global oil prices, according to Gary Heminger, CEO of Marathon Petroleum, the largest U.S. refining company.
Global oil prices have plummeted recently, with prices of West Texas Intermediate (WTI), the benchmark U.S. crude oil, hovering around $53 per barrel recently. That contrasts with its Oct. 3, 2018, price of $76.20. As a result, prices at the pump are below $2 per gallon in many states.
However, Heminger said when you look at the price decline, it is already threatening U.S. shale production.
“If you look at the Canadian producers, when you’re looking at the wide spreads of the Western Canadian Select versus WTI, you look at some of the real cost to get some of the crude out of the Bakken because the pipelines are full – I think we are going to start seeing a slowdown in drilling if they don’t see some prices turn around,” Heminger told FOX Business’ Maria Bartiromo on Wednesday.”
Meanwhile, OPEC will meet on Thursday to discuss cutting output, amid pressure from President Trump to push prices even lower. The decision could ultimately benefit U.S. shale producers.
“I think you’re going to see some sort of a pullback in their production,” Heminger said. “It’s been very clear when you look at the 5-year running average of inventory of global supply of crude the supply got down into the low to medium end of that range early in the year but since has grown significantly and it’s the great production story we have.”
Trump’s goal of energy dominance has led to the increase in domestic and global production. However, Heminger said the U.S. is still very reliant on global crude oil.
“Today the U.S. is still importing nearly half of its needs even though our production has grown tremendously,” he said. “So the inventories have started to rebuild and so this is going to be a very, very important meeting in OPEC.”