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Don’t Rule Out An Oil Price Downturn

Shale

Friday November 10, 2017

In the latest edition of the Numbers Report, we’ll take a look at some of the most interesting figures put out this week in the energy sector. Each week we’ll dig into some data and provide a bit of explanation on what drives the numbers.

Let’s take a look.

1. U.S. shale growing or slowing down?

(Click to enlarge)

- Oil prices faltered mid-week on news that U.S. oil production jumped up to 9.62 mb/d in the first week of November, a gain of 67,000 bpd week-on-week.
- The uptick in output suggests that shale growth remains robust, putting output more than 1 mb/d higher than the low point last year of 8.5 mb/d.
- But the weekly EIA data has consistently over predicted output this year, at least according to the EIA’s own monthly data, which is widely seen as more accurate but is published on a several-month lag.
- The monthly data only runs up through July, a month in which the U.S. averaged 9.238 mb/d. But at the time, in July, the EIA predicted in its weekly data that the U.S. was producing about 9.4 mb/d.
- The discrepancy might seem minor, but the weekly data has an enormous impact on day-to-day oil price movements, as seen this week when WTI and Brent retreated after the publication.
- The implication is that there is evidence that the U.S. is producing less oil than the market currently believes.

2. Shale deals increasingly include “earnouts”

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