British energy giant BP Chief Executive Bob Dudley likened the U.S. shale oil industry to 'a market without a brain' that only responds to change in oil prices, instead of global market dynamics of supply and demand.
'The U.S. is the only country that completely responds to market signals, like a market without a brain, it just responds to price signals,' Dudley said Tuesday at International Petroleum Week conference held in London, according to world media.
Dudley said while the world's second and third largest crude oil producers Russia and Saudi Arabia adjust their production levels with respect to oversupply or cuts in the global oil market, the American shale oil market 'responds purely to oil prices.'
The U.S. shale oil industry often responds quickly to prices as producers adjust their output rapidly. Crude producers in the U.S. add or cut off oil drilling rigs that often see weekly changes, according to oilfield services company Baker Hughes data released every Friday.
Yet, shale oil has made the U.S. the world's biggest crude producer in the span of a decade as crude oil production in the country rose from 5 million barrels per day (mbpd) in 2008 to a record high 12 mbpd for the week ending Feb. 15, 2019 -- the latest data available of the U.S.' Energy Information Administration (EIA).
U.S. shale also benefits from the coordinated efforts of Saudi Arabia and Russia that so far have twice decided to trim their oil production levels in order to lower oversupply in the global oil market and raise crude prices.
While U.S. shale needs oil prices to remain above around $40 per barrel to survive, higher oil prices benefit American shale companies for more production and profit.
After oil prices collapsed by plummeting below $30 a barrel in January 2016, 250 oil firms in the U.S. went bankrupt with a loss in investment of $250 billion.
Saudi Arabia spearheaded OPEC and Russia-led non-OPEC oil producers, who agreed on Dec. 10, 2016 to lower their supply by around 1.7 million barrels per day throughout 2017 to rid the supply glut, and whose efforts eventually helped raise prices.
The world's two oil heavyweights joined forces for a second time on Dec. 7, 2018 when OPEC and its allies agreed to lower their total production by 1.2 million barrels per day for the first six months of 2019.
The second effort by Saudi Arabia and Russia has already started to trim some of the oversupply in the global oil market, and crude oil prices climbed to their three-month high on Feb. 22, 2019.
By Ovunc Kutlu
Anadolu Agency
energy@aa.com.tr