A dispatch from Cowboyistan

The theoretical land of Cowboyistan, which comprises the crude production of three major US shale fields, could drive about 70pc of US crude output growth in 2015, according to Continental Resources chief executive Harold Hamm. So decisions that US producers in those fields (Eagle Ford, Bakken and Permian basin) make in coming months to shut production or not will be key to global crude prices, which are down about 60pc since June.

“This decline may begin sooner than anyone is anticipating,” perhaps in the first half of 2015, predicted Hamm, whose company is the biggest Bakken producer, speaking at the Argus Americas Crude Summit in Houston yesterday. Production from those three key fields could peak in March and begin to decline in June, Hamm told Argus on the sidelines of the conference.

For US refiners who have enjoyed strong margins amid lower-cost feedstock, the question is: “Who is going to be the one that flinches?” said Valero chief executive Joe Gorder. Complex Gulf coast refineries like the ones Valero operates will continue to crank out exports to Latin America and Europe, while competitors in the Mediterranean, western Europe, Australia and Japan face the most pressure to cut runs, Gorder told the conference.

ExxonMobil, which wears multiple hats as both a major US producer and refiner, continues to beat the drum for a lifting of US crude export restrictions born from the 1973-74 Arab oil embargo. Speaking at the Argus conference, ExxonMobil vice-president of public and government affairs Ken Cohen also joined US refiners in criticizing the Jones Act, which requires that goods shipped between US ports be carried on US-flagged vessels featuring US crews.

For executives, policymakers and analysts searching for a clear path forward, the forecast is decidedly cloudy. “My crystal ball is about as foggy as everybody else’s,” Hamm said.

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