• 4 minutes Oil Price Editorial: Beware Of Saudi Oil Tanker Sabotage Stories
  • 6 minutes UAE says four vessels subjected to 'sabotage' near Fujairah port
  • 13 minutes Mueller Report Brings Into Focus Obama's Attempted Coup Against Trump
  • 15 minutes Magic of Shale: EXPORTS!! Crude Exporters Navigate Gulf Coast Terminal Constraints
  • 9 hours Wonders of Shale- Gas,bringing investments and jobs to the US
  • 6 hours Why is Strait of Hormuz the World's Most Important Oil Artery
  • 3 mins Trump bogged down in Mideast quagmire. US spent $Trillions, lost Thousands of lives, and lost goodwill. FOR WHAT? US interests ? WHAT INTEREST ? . . . . China greatest threat next 50 years.
  • 4 hours California's Oil Industry Collapses Despite Shale Boom
  • 3 hours North Dakota oil output totals 1.39 million b/d in March, up 4% on month: state
  • 34 mins Misunderstanding between USA and Iran the cause of current stand off, I call BS
  • 2 hours Rural and Conservative: Polish Towns Go 'LGBT free' Ahead Of Bitter European Election Campaign
  • 2 hours Global Warming Making The Rich Richer
  • 8 hours IMO2020 To scrub or not to scrub
  • 9 hours Knock-Knock: Aircraft Carrier Seen As Barometer Of Tensions With Iran
  • 13 hours Crude oil?
  • 6 hours Iceland Reducing Gas Stations By Half By 2025
  • 1 hour Compensation For A Trade War: Argentina’s Financial Crisis Creates An Opportunity For China
  • 9 hours "We cannot be relying on fossil fuels to burn as an energy source at all in our country" - Canadian NDP Political Leader
Alt Text

The Shale Boom Is About To Go Bust

The shale boom has transformed…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Trending Discussions

European Oil Demand Is Shockingly Weak

One of the unexpectedly soft spots in global oil demand recently has been in Europe.

To be sure, Europe was never expected to be a major driver of oil demand growth. Consumption has been mostly flat for a long time. However, demand has actually declined year-on-year in the past few months, which suggests a slowdown in the European economy.

Most glaringly, demand in Germany has fallen significantly. According to Standard Chartered, demand in Germany fell by 302,000 bpd in December compared to a year earlier. That was the tenth consecutive month of an annual decline in consumption in excess of 150,000 bpd.

In November, Germany seemed to be the only source of fragility. But in December, the weakness popped up in many more European countries. According to Standard Chartered, in December, year-on-year declines in consumption were reported in:

  • France (-124,000 bpd)
  • Italy (-38,000 bpd)
  • the UK (-36,000 bpd)
  • the Netherlands (-85,000 bpd)

Overall, in OECD Europe, demand plunged by a staggering 755,000 bpd in December. Standard Chartered argues that the main threat to global oil demand (and oil prices) comes from Europe, not China.

But China, too, is a source of demand weakness. More than a handful of metrics point to an economic slowdown, including negative PMI numbers, a decline in car sales, and slowing imports and exports. The outcome of the U.S.-China trade negotiations will go a long way to deciding what happens next. For now, the evidence seems to suggest that both the American and Chinese governments are eager to make a deal. Related: The World’s Largest Battery To Power The Permian

However, major oil forecasters have had to slightly lower their demand estimates for this year after previously holding them steady. OPEC lowered its estimate by 50,000 bpd, while the EIA made a similar revision. The big question is if these changes were one-offs or the start of more downgrades.

Standard Chartered puts out a weekly “bull-bear index,” which offers a gauge on market sentiment. The latest reading was a -49.1, a huge swing from the week before and the most negative reading since December. “The main source of weakness came from the implied demand readings, which were lower w/w for all seven main product groupings and lower than the average of February 2018 for all products except propane,” the investment bank concluded.

Even assuming demand estimates remain mostly unchanged, they stand in contrast to the ongoing upward revisions to supply – specifically, U.S. shale growth. The EIA came out with a whopping revision of 300,000 bpd to U.S. supply growth for 2019, expecting an average of 12.4 million barrels per day.

In a separate report – the Drilling Productivity Report – the EIA expects the U.S. to add another 84,000 bpd in March compared to February, another massive jump in output. The gains are led by the Permian basin (+43,000 bpd), with smaller additions from elsewhere.

Shaky demand combined with higher-than-expected production from U.S. shale presents serious downside risks to the oil market. “The upswing in oil prices appears to have ended for now. It seems that the sharp rise in oil production in the US is having a slowing effect after all,” Commerzbank wrote in a note on Wednesday.

Related: An Underestimated Niche In Oil & Gas

“Production at the Permian Basin, the largest shale play, is set to exceed 4 million barrels per day for the first time in March. As such, this shale play alone significantly exceeds the amounts produced by the United Arab Emirates, Brazil and Kuwait. Only five countries produce more oil than the Permian Basin, excluding the US,” Commerzbank noted.

While these gains are largely baked in at this point, the U.S. shale complex still has some glaring problems. Shale companies are not uniformly profitable – in fact, many are not profitable at all. Investors are increasingly demanding production restraint in favor of shareholder returns. That still could slow development.

Meanwhile, if the drilling treadmill ever slows down, growth will take a hit. The production frenzy of the last few years means that the legacy decline rate – the losses from existing wells already online – has also exploded. In March, the Permian is expected to lose 249,000 bpd in declines from legacy wells, a figure that has doubled since the start of 2018. To be sure, there is enough new output (+292,000 bpd) to ensure a net gain of 43,000 bpd, but the drilling treadmill has accelerated significantly. As such, when the Permian hits a rough patch, so will production.

However, this may be a problem for another day. The drilling frenzy continues.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage

Trending Discussions


Leave a comment
  • abr boisbri on February 22 2019 said:
    Peoples are doing what i said in all car blog, i said to buy a small used low cost simple car and try to avoid to drive it. So less petroleum consumption and less pollution to build and operate brand new ferraries and bmw and mercedes, only used 1999 like Toyota yaris or small volkz polo. Also it is time to stop working in the fake news industry and stay home instead. also throw out 3 quarter of state employees that have to hack countries bank account and build social problems and studies and useless overpaid working hours. The hippies of the late sixties were visionaries, everyone have to dance in the streets instead of polluting by driving gas cars.
  • Colin Boyle on February 22 2019 said:
    Good news - but Europe must go much further and much faster!
    We need to be weaning ourselves of fossil fuels ASAP.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News