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Will Oil Demand Recover In 2021?

Will Oil Demand Recover In 2021?

Oil prices are rallying due…

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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More Shale Giants Forced To Cut Production As Oil Price Crisis Persists

The big oil production curtailment in the U.S. shale patch continues as more companies announced on Monday output reductions to protect their balance sheets in the face of unsustainably low oil prices.

Continental Resources said today it had voluntarily curtailed 70 percent of its operated oil production in May as it swung to a net loss of $185.7 million for Q1, compared to a profit of $187 million for the same period of 2019.

Continental Resources is currently operating five rigs and expects to reduce that number to four rigs by the end of this year—this is an 80-percent cut in rigs from the beginning of 2020, the company said.

“This has been an unprecedented global market environment, which has seen crude oil demand fall by approximately 30% due to the COVID-19 pandemic. Continental is committed to preserving value over volumes. Our assets are secure and we are confident that this deferred production will bring more value to our shareholders in the months to come,” CEO Bill Berry said.  

Another producer, Callon Petroleum, also announced on Monday it had further reduced activity, including the suspension of all completion activity in April and moving to one active drilling rig by mid-May. Callon has shut in around 1,500 bpd gross production in April and expects to reach over 3,000 bpd gross shut-ins during May, with June volumes currently under evaluation.

As a whole, the United States is on track to cut 1.7 million barrels of oil production per day by the end of the first half of 2020, according to Reuters calculations of state and company data. Related: What’s Behind The Sudden Rally In Natural Gas?

Continental Resources and Callon Petroleum join many other U.S. shale producers that have already announced voluntary curtailments in their production. ExxonMobil is curtailing output in the Permian.

ConocoPhillips estimates voluntary curtailments in June at 260,000 boepd gross in the Lower 48. Diamondback Energy halted in March all completion operations for a minimum of one month, and announced plans to voluntarily curtail 10- 15 percent of its expected May oil production. Permian-focused producer Centennial Resource Development hopes to curtail up to 40 percent of its production this month in response to weak realized prices. 

Parsley Energy expects to voluntarily curtail up to 23,000 bpd of net oil production volumes in May based on near-term regional pricing dynamics. Parsley Energy was one of the few producers in favor of the Texas Railroad Commission ordering a pro-rationing of production, which, Commissioner Ryan Sitton said last week, “will not be happening.”  

By Tsvetana Paraskova for Oilprice.com

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