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Cargo Trends Affirm Falling Oil Production

Waterborne shipments of crude and condensate have been heading in one direction since the beginning of the shale revolution: up. That statement is no longer true. Nearly halfway through the month, and September loadings are more than 200,000 barrels per day lower than during the same period last year.

WaterborneLoadings

All Waterborne Loadings (source: ClipperData)

Related: Is This The End Of The LNG Story?

Waterborne volume is the last to be added and the first to be cut. A drop in domestic waterborne volume is the first firm indication of lower production, because the waterborne barrel is the hardest and most expensive one to move.

According to the EIA, U.S. production peaked in April at 9.6mn bpd, which coincides with the peak in shipped volume at 1.8mn bpd. Since then, shipments have slid slowly, but the drop became precipitous this summer and is gathering momentum.

There has also been a sharp slowdown in crude-by-rail traffic, evident in the volumes reaching the Mississippi River and the rail-to-barge terminals on the coasts. Pipeline volume is likely the most resilient, but judging by September’s waterborne numbers, is also likely to be lower.

Related: The Shale Delusion: Why The Party’s Over For U.S. Tight Oil

The full extent of the decline in shipments has been obscured by the explosive growth in condensate exports, which flattered this year’s numbers.

As ClipperData has been reporting since June, condensate exports have now slowed, also highlighting the extent of the drop in liquid hydrocarbon production and shipment. The volume decrease, especially in the Gulf, points to further downward revisions in the EIA production numbers, especially since the decrease is happening in West Texas.

Related: EU’s Energy Market In For Some Drastic Changes

A hint of this came yesterday afternoon. In its Drilling Productivity Report, EIA shows for the second month in a row that production is projected to grow in October in only one of the shale plays– the Permian Basin. On a year-over-year basis, only the Permian is now projected to be higher:

EIAOilProductionBPD

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(source: EIA)

By Nilofar Saidi

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  • Joe Clarkson on September 19 2015 said:
    "the waterborne barrel is the hardest and most expensive one to move"

    My understanding has been that the order for least expensive continental-area shipments was pipeline first, waterborne second and rail third. What am I missing?

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