U.S. shale production set to fall again in July, EIA says

Fuel Fix ^ | June 8, 2015 | Collin Eaton

[thackney]

The federal forecast of U.S. shale production is sinking again for the third month in a row, but the decline is still just a thin layer off the top.

Daily oil production at the nation’s six biggest shale plays is set to slip by 91,000 barrels from June to July, the Energy Information Administration says. That’s roughly 2 percent of the 5.48 million U.S. barrels anticipated next month, hardly the kind of decline oil-industry stakeholders had expected for after drillers sidelined nearly 1,000 oil-drilling rigs in the last six and a half months.

“It’s a pretty resilient industry,” said Bill Herbert, an analyst at Simmons & Co. International in Houston. And given the billions that oil producers have raised this year — they still have generous equity investors waiting in the wings — it’s not inconceivable that crude production could start to rise again early next year, especially with oil prices flirting with the $60-to-$65 a barrel range, Herbert said.

“If you send the right price signals, the oil producers are going to start reinvesting, and production will respond,” he said.

Oil traders are watching the shale industry and Baker Hughes’ U.S. rig count closely to see whether the nation’s production, which helped feed a glut of crude and send oil prices plummeting in the last 12 months, will ease up enough to lift prices again. Despite the falling rig count, not much has changed on the production side of the business, largely because oil companies are moving rigs to the sweetest shale acreage and because their rigs are more efficient, analysts say.

So far, falling production from older, deteriorating wells is outpacing the output from newly drilled wells, especially in the Eagle Ford Shale in South Texas, which is expected to see daily production decline by 49,000 barrels by July. Daily output at the Bakken Shale in North Dakota and the Niobrara formation in Colorado, Nebraska and surrounding states is supposed to fall by 29,000 and 17,000 barrels a day, respectively.

The Permian Basin in West Texas, so far the nation’s stalwart oil patch, still pumping out adding crude, is slipping close the point at which its net production will be in the red. Its month-over-month production is expected to be 3,000 barrels a day by July, the EIA estimates.

West Texas Intermediate, the U.S. benchmark crude, fell 99 cents to $58.14 a barrel on the New York Mercantile Exchange. The international standard, Brent, dipped 62 cents to $62.69 on the ICE Futures Europe.

Meanwhile, the nation’s natural gas production is shrinking in all but the Utica Shale in Ohio. From Texas to Pennsylvania, old wells are expected to bring down gas production by 221 million cubic feet a day, or 0.5 percent of the nation’s gas output.

[thackney]

America’s Shale Oil Boom Grinding to Halt as U.S. Forecasts Drop
http://www.rigzone.com/news/oil_gas/a/139012/Americas_Shale_Oil_Boom_Grinding_to_Halt_as_US_Forecasts_Drop/?all=HG2

“Production has to come down because rigs drilling for oil are down 57 percent this year,” James Williams, president of energy consultancy WTRG Economics, said by phone Monday from London, Arkansas. “Countering that is the fact that the rigs we’re still using are more efficient and drilling in areas where you get higher production. So that has delayed the decline, and it’s making us nervous about when exactly it’s going to happen.”...

We do not believe that the direction of U.S. oil output has changed,” Standard Chartered analysts including Nicholas Snowdon said in a research note June 1. “In our view, U.S. oil supply is still falling, and it is likely to carry on falling for the rest of this year.”

Shale oil output will decline by 105,000 barrels a day in July after dropping 86,000 barrels in June, according to the London-based bank.

EOG Resources chief executive officer Bill Thomas said at a conference last month that U.S. production would drop through the end of the year...

[Paulie]

—“If you send the right price signals, the oil producers are going to start reinvesting, and production will respond,” he said.—

I would think the ‘right price signals’ would be fueled by an expanding US, if not world, economy. If/when that happens.

I’m pleasantly surprised that shale has weathered the storm, at least thus far. Happily, predictions of its demise were unwarranted. Much to the chagrin of our anti-hydrocarbon president.

[Eric in the Ozarks]

I remember when American Hoist went out of business making cranes and draglines in St. Paul. Dozens of small suppliers and manufacturers died off shortly afterward, taking their jobs down with them.

Then, suppliers of specialty metals, lubes and greases pulled away and those jobs were closed out.

Someone reported 90 million people have given up looking for a job. That’s one out of three Americans. I wouldn’t count on a rebound in the oil & gas industry anytime soon.