Oil Price Rebound May Come in Late 2021, Pipeline Giant Says By Bloomberg

© Bloomberg. A pump jack operates near Stratford, Texas, U.S., on Saturday, Sept. 26, 2020. After all the trauma the U.S. oil industry has been through this year — from production cuts to mass layoffs and a string of bankruptcies — many producers say they’re still prioritizing output over reducing debt. Photographer: Angus Mordant/Bloomberg

(Bloomberg) — The recovery in demand coupled with the retrenchment in the U.S. shale sector could lead to higher prices as soon as in the second half of 2021, according to one of the top bosses of the country’s largest pipeline company.

“Given the combination of the record retrenchment in drilling and completion activities by U.S. producers, refocused capital allocation and the effects of steep decline curves resulting in a decrease in shale production, we believe this price signal for higher prices could occur as early as the second half of next year,” Jim Teague, co-chief executive officer of Enterprise Products Partners (NYSE:) LP, said Wednesday in the company’s third-quarter earnings statement.

“In the interim, we believe the midstream industry will be challenged in its producer-facing businesses,” he added.

An historic crash in oil prices along with a glut of fracking after years of debt-fueled growth has triggered a crisis that’s driven some U.S. producers into bankruptcy and many others to slash capital spending as a way to preserve their balance sheets. That’s also prompted consolidation in the industry, with a series of takeovers involving shale producers announced over the past few months. As a result, American oil production is showing no immediate prospect of revisiting pre-pandemic highs.

Houston-based Enterprise, whose web of pipelines stretches from Texas to Wyoming to New York, has cut planned growth spending by $1.5 billion for 2020 and 2021 in response to adverse conditions. Last month, it shelved plans to add 450,000 barrels a day of capacity to a system that carries oil from Texas’s Permian basin to the U.S. Gulf Coast.

The company reported third-quarter net income of 48 cents per share, up from 46 cents a year earlier.

©2020 Bloomberg L.P.

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