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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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Analysts May Have Overhyped America’s Largest Oil Basin

  • Analysts had hoped that oil production at the Permian Basin would hit record highs in October, with the EIA forecasting a 66,000-bpd increase.
  • As the active rig count drops in the basin, however, analysts may soon have to revise those forecasts.
  • Shale drillers are prioritizing returns to shareholders and paying down debts while at the same time dealing with supply chain problems and inflation.

Current forecasts of U.S. crude oil production growth may have to be significantly revised as the recent slide in active drilling rigs in the top shale basin, the Permian, suggests that output may disappoint due to supply chain constraints and cost inflation in the double digits.

The rig count in the Permian Basin dropped by 2 to 340 last week, as the number of total active drilling rigs in the United States dropped by 1, according to new data from Baker Hughes published on Friday.

The active oil rigs in the Permian now number 316 - the lowest in four months. This suggests that the most prolific U.S. shale basin, which continues to drive America’s oil production growth, is going through “a significant slowdown,” Bloomberg Opinion columnist Javier Blas argues.

The slowdown in activity, as evidenced by the drop in active oil rigs from 331 in July to 316 now, points to the fact that forecasts of Permian output, and by extension, U.S. crude oil production growth, need to be recalibrated lower.  

As shale drillers prioritize returns to shareholders and paying down debts, they are not rushing to drill even at $90 or $100 oil. Even those planning an increase in drilling activity face supply chain delays and up to 20% higher costs.

At the same time, the Energy Information Administration said in its latest Drilling Productivity Report this week that crude oil production in the Permian is set to hit a record high next month, adding 66,000 bpd from September to reach 5.413 million bpd in October.

Yet not everyone is so optimistic: Pioneer Natural Resources CEO Scott Sheffield said last week that U.S. oil production growth would likely disappoint both this year and next.

Sheffield has forecast that U.S. oil production will add 500,000 bpd this year but in 2023 the production gains may be lower than this, due to constraints, Reuters reported last week. The EIA forecasts production growth of 800,000 bpd for 2023.   

By Tsvetana Paraskova for Oilprice.com

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Leave a comment
  • Mamdouh Salameh on September 14 2022 said:
    The whole world knows that the US Energy Information Administration (EIA) in cahoots with its cheerleaders the International Energy Agency (IEA), Rystad Energy, BP Statistical Review of World Energy and the Financial Times have been for years overhyping if not lying about US shale oil production. Their rationale has been to give the United States some influence in the global oil market along with Russia and Saudi Arabia and to justify lies that the US has become self-sufficient in oil.

    US shale oil is a spent force. Failure of shale drillers time and again to raise production has far less to do with capital discipline or a reduction in the number of oil rigs and virtually everything to do with the fact that the sweet and most lucrative spots in the shale plays have already been exhausted forcing drillers to move to poorer and more costly spots thus causing costs of production to rise and production to decline.

    My estimate of US oil production including shale oil doesn’t exceed 9.5-10.0 million barrels a day (mbd). And while the EIA will continue to aggressively hype about US shale oil production, rising US crude oil imports undermine such claims and give them the lie.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
  • David Messler on September 14 2022 said:
    Hi Tsvetana. I enjoy your work. I am an expert on the Permian basin and often write articles for OilPrice about it and the companies who drill there. I recently put out an article related to this topic on OilPrice. https://oilprice.com/Energy/Crude-Oil/How-High-Can-US-Shale-Production-Climb.html

    Linking to technical articles, like mine might give your articles additional penetration. Just a thought. Cheers

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