As initially pointed out by Peakoilbarrel.com in a recent article, discrepancies between actual data for oil production in Texas vs. what the EIA claims are so stark it's almost scary. How this can be overlooked by the mainstream media as well as by most of the broker community is even more alarming. Further, how the U.S. oil industry fails to catch it and question it given that their livelihood is tied to it is even scarier.
Using the data plotted on the Texas RRC website, combined with the knowledge that Bakken production has been flat to declining, makes us wonder how in the world the EIA can not only restate monthly production higher recently, starting in March, but expect over a 700,000 barrels per day (B/D) overall increase for 2015.
Using the IEA's own data off their website on page 7 of their June monthly report, in Texas they expect a 2015 increase of 400,000 B/D (3592 vs. 3164 in table below) alone. Historical data through May shows production essentially flat from March to May ( 3675 vs.3609) as well as in 1Q15 to 2Q15 (3614 vs. 3602). Related: Could Armenia Be The Next Ukraine?
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The EIA's data below shows a ramp of 200,000 per day from Dec to April with a slight decline latest month which is even worse.
EIA Texas Production (thousands of barrels per day)
| 14 Nov | 14 Dec | 15 Jan | 15 Feb | 15 Mar | 15 Apr |
| 3,426 | 3,510 | 3,463 | 3,603 | 3,775 | 3,711 |
Comparing these figures with Texas RRC figures off their website, the differences are startling. First, the chart below clearly shows the trend through 4/1/15 as being flat to down, as production nosedived in April by nearly 15 percent, compared with the previous month, and 15 percent from end of 2014.
Yes, these numbers bounce around but, plotting the monthly data below, the trend is clearly down, not up. So the first question is: what prompted the EIA to boost expectations recently, starting in March, when the data is clearly flat in the largest region of EIA growth expectations?
Second, why, based on EIA's own projections, should one expect production in 2015 to grow at all let alone by 400,000B/D in Texas? To me, it was an attempt to offset the positive price impacts of the recent large inventory draws. Honestly, I don't know what else to conclude as the data does not warrant a ratcheting up of expectations for higher production. Larger E&P company managements who can have some sway better start initiating inquiries into all of this in my view. Especially if the EIA doesn't revise its revisions, and soon. Related: How Greece Crisis Could Drag Oil Prices Down
Source: Texas RRC
Below is a chart provided by Peakoilbarrel.com on monthly oil production clearly showing declines in North Dakota (Bakken) too. Related: Nature Provides Novel Solution To Energy Storage Problem
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Last, I should note the trends in natural gas production in Texas are similar. And with growth slowing in the Marcellus and Utica shales as demand increases, one could get quite optimistic about higher prices. This is especially true if the upcoming winter is colder than normal. Moreover, there could be strong demand pull. Utilities are increasingly switching over to natural gas for electricity generation - coal plant closures could reach a high watermark this year. And by the end of the year, the U.S. will start exporting natural gas, further depleting inventories, which have only recently moved back towards their five-year average from low points. This suggests natural gas prices could rise as well.
Source: TX RRC
By Leonard Brecken of Oilprice.com
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Leonard is a former portfolio manager and principal at Brecken Capital LLC, a hedge fund focused on domestic equities. You can reach Leonard on Twitter. More
Comments
The EIA monthly data just released today shows a decline in April production. See http://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbblpd_m.htm. You will note that it has lower April production in both Texas and North Dakota. The total production increase is due to higher Federal offshore production in the Gulf of Mexico.
Furthermore, the April Texas RRC data is likely to be more understated than the normal 19% as is common when producers are under financial stress and are later than normal in reporting.