CNBC: Oil prices have tumbled to their lowest levels this year amid those tensions between Qatar and its neighbors — Saudi Arabia, Egypt, Bahrain and the United Arab Emirates. Do you see a ceiling on oil prices at this moment?
Hamm: I don’t think we speculate on where it will go. Look what has happened to the market. OPEC decided to flood the market in 2014 and it was a big mistake. OPEC saw shale as a threat and tried to quash it. They failed. It was not the wisest thing they did. They now realize it was a mistake. Last time they killed the market was in the 1980’s and it took a while to turn things around. They decided in January to cut back production. But you have to remember, you need more than 120 days to turn around the impact of the cuts. We are now more than 120 days in, and we are seeing fundamentals changing. Inventories are on a downward trend, but sporadic week to week.
CNBC: You said last month in your May 9 shareholder meeting that you saw about a 1 million barrels per day draw-down on oil inventories. How long do you see this playing out to get rid of this overhang in supplies?
Hamm: The biggest challenge is 60 percent of refineries don’t participate in announcing inventories. Only 40 percent participate. It’s an inaccurate mechanism from the start. One week versus another, there’s going to be a huge variance. Two inventories that everyone looks at are API (American Petroleum Institute) and EIA (U.S. Energy Information Administration), and those two last week showed a 2-million barrel difference (between one another). They don’t even jibe. The fact is, this is a choppy situation, but I believe fundamentals are in place. Demand is slightly outpacing supply. Ultimately the production cuts take effect.
CNBC: The EIA is predicting U.S. oil production could rise to a new high record of around 10 million barrels a day. At the pace U.S. shale production is going, when do you see that record being shattered?
Hamm: It all depends on price. Continental has been disciplined. Operators across the U.S. have been also. Across the U.S., fields have not been turned on. Seventy-five percent of rigs have been laid down in the industry. Entire fields have gone undrilled, waiting on better product prices. Four hundred thousand people were laid off in the industry, so it’s going to take a while to get them back. Every operator has a lot of levers to pull and options. It all depends on price.