Readers will recall that, for the last several months, I have noted that US oil production per the EIA's weekly Petroleum Status Report was inconsistent with the data from the EIA's monthly Drilling Productivity Report (DPR)
The graph below shows the state of play as of last week. The two red arrows at right show the contradictory trends, with total oil production essentially flat while shale oil production is shown rising at a healthy clip. I have noted that this contradiction would have to be resolved by either increasing the weekly numbers or reducing shale oil output.
We now have the answer.
The graph below shows the state of play as of March 14th, when the EIA issued the March DPR. It shows simply massive downward reductions in US shale oil output. In the March report, shale oil output from the key plays is reduced by 443,000 bpd for January and 250,000 bpd for February. If we go back one more month to the January DPR, shale oil production has been reduced by 542,000 bpd for December 2022. This is a huge revision, more than 4% of total US crude and condensate production over a two month period.
With this revision, as the current graph (below) shows, US shale oil production is largely flat over the last four months, and trends in shale oil supply are consistent with the overall US crude oil supply (including conventional onshore wells, Gulf of Mexico offshore, and Alaska). I need hardly point out that this is not good news, as the visible peak of horizontal oil rigs is now beginning to pair up with plateauing oil production, just as we would expect.
The most plausible interpretation is that US crude and condensate production will stagnate for the balance of the year. As I wrote in The Oil Supply Outlook (Feb. 2), the plateau has been expected since at least 2017 (see Fig. 6), so it should come as no surprise. I think the surprise, however, will be in production trends going forward. The EIA sees a long plateau in US oil production. I think it is more likely that we'll see the beginning of an erosion in supply from 2024.
In light of this, President Biden's approval of drilling in Alaska is not hard to understand, but don't expect it to have a material impact on supply anytime soon.
By Steven Kopits of Princeton Policy Advisors via Zerohedge.com
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Here is the evidence.
1- There has always been a difference of 1.0-1.5 million barrels a day (mbd) between the EIA’s weekly and monthly figures on US oil production. This was deliberate as the EIA worked on the principle that it will publish excessively high weekly figures and by the time it published its monthly figures which are far less than the weekly, the market would have forgotten its hyped weekly figures but only after it had achieved its intended impact on the market.
2- In fact, the so-called adjustment in weekly and monthly crude oil data, or “Unaccounted For Crude Oil” has reached 2.266 mbd.
3- EIA figures of US oil production, export volumes and oil inventory rises figures have been imperfect for years. This means that when the EIA was announcing that the United States is the world largest crude oil producer at 12.3 mbd in 2019 and that it has recently been exporting 5.629 mbd, it wasn’t telling the truth.
4- EIA’s figures of US oil exports include other products, likely natural gasoline and naphthas (light hydrocarbns) which could be blended into crude. The issue is further compounded by the fact that products that the EIA believes are being blended with crude oil also show up as products exported or supplied. In effect, those products are being *double counted. That would mean that actual U.S. crude exports have been far less than what is reported.
5- For the last several months, US oil production according to the EIA’s Petroleum Status Report was inconsistent with the data from its monthly Drilling Productivity Report (DPR). While total US oil production was flat during the last four months, the EIA was claiming that shale oil production was rising at a healthy clip. This contradiction would have to be resolved by either increasing the weekly numbers or reducing shale oil output.
6- In its March DPR, the EIA made a massive downward reductions in US shale oil output amounting to 443,000 barrels a day (b/d) for January and 250,000 b/d for February. In the January DPR, shale oil production has been reduced by 542,000 b/d for December 2022.
7- With this revision, US shale oil production is largely flat over the last four months and trends in shale oil supply are consistent with the overall US crude oil supply.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert