Crude oil production in the U.S. shale patch is set to decline by 68,000 bpd next month, with every play registering declines in output except the Permian, the Energy Information Administration said in its latest Drilling Productivity Report.
While production in the Permian is expected to increase by 23,000 bpd to 4,173 million barrels daily, output in the Niobrara shale play alone will offset this with an equal decline. In the Eagle Ford, production is set to decline by 28,000 bpd—the biggest decline—while production in the Anadarko, Bakken, and Appalachia plays is seen to fall by 20,000 bpd, 19,000 bpd, and 1,000 bpd, respectively.
This means total shale oil production in October could average 7.64 million bpd daily next month, down from 7.708 million bpd this month.
Oil production across U.S. shale plays fell sharply in late spring as the oil price collapse made a lot of wells unprofitable and even loss-making. With oil prices still around 40 percent below their levels from the start of the year and the outlook negative, the October decline may not be the last monthly one for the shale patch.
The outlook on oil demand remains the single most negative factor for oil price, with the latest blow in this respect being BP’s 2020 Energy Outlook, according to which oil demand may never return to pre-pandemic levels, meaning the peak in global oil consumption might have been reached last year.
Another bearish factor for prices was the pending reopening of Libya’s oil ports, which would signal an increase in production, too. Libya’s oil production has been slashed to less than 100,000 bpd amid the months-long blockade of the export terminals but reopening them will prompt a ramp-up in output. The reopening is not yet a done deal but the latest reports suggest it may only be a matter of time.
By Irina Slav for Oilprice.com
Baker Hughes’ oil rig count is a real measure of oil industry activity. The US Energy Information Administration (EIA) was claiming that US oil production before the COVID-19 pandemic was 13 mbd when the oil rig count was 744 rigs. Since then rigs according to Baker Hughes have declined to 172. This means that shale oil production which accounts for 65% of total US oil production currently amounts to 1.95 mbd. Adding a conventional oil production of 4.55 mbd will give a US production of 6.5 meaning that US production has so far lost 6.5 mbd or 50% of production as a result of the pandemic. And yet, the EIA is still maintaining that US production has only declined by 2 mbd from 13 mbd to 11 mbd.
Libya can’t be a bearish factor for prices for two reasons. The first is that Libya’s oil might return for 24 hours and then disappear for months. Libya has become a mere footnote to the global oil market.
The second reason is that the global oil market has already factored in Libya’s absence since 2011 with other OPEC members particularly Saudi Arabia offsetting loss of Libyan crude oil supplies.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London