With Saudi Arabia resuming oil…
The OPEC production cut agreement…
The U.S. will produce slightly less oil and gas this year than previously expected after a brutal winter dumped snow on much of the country. The bad weather delayed the completion of oil and gas wells and forced companies to cut back on drilling. The U.S. Energy Information Administration projects that total U.S. oil production will be 120,000 barrels per day lower than it would have been.
Rig counts are also down for the second straight week, having dropped by a total of 21 in February alone. That brings the total rig count to 1,764.
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Yet, in its Short Term Energy Outlook, the EIA still forecasts a dramatic increase in oil production this year and next. U.S. oil production will rise from 7.4 million barrels per day (bpd) in 2013 to 8.4 million bpd in 2014. And 2015 will see slightly slower growth but still significant gains, with production rising to 9.2 million bpd. If that occurs, oil imports will drop to 25% of consumption, their lowest levels since 1971, and down from a high of 60% in 2005.
EIA’s latest report on drilling productivity also shows drillers making efficiency gains in the Bakken and Eagle Ford Shales. For example, the average rig in the Bakken produces 8 more barrels per day from a new well than it did last year, and in the Eagle Ford that number reaches 14 barrels per day. This indicates that drillers are still squeezing out some efficiency gains as they gain experience. That is important because the natural decline of these regions is also increasing. The initial spike in production from an average shale well is followed by rapid decline. EIA forecasts that the decline of legacy wells will be greater in March 2014 than it was in the same month last year.
By Charles Kennedy of Oilprice.com
Charles is a writer for Oilprice.com