The US shale oil boom is officially over

Gone are the days of explosive growth in US shale oil production. US oil production is increasing, but at a much slower pace than before the 2020 crash, and at lower rates than expected a few months ago.

The shale sector’s new priorities – capital discipline, focus on shareholder returns and debt repayment – have combined with supply chain constraints and cost inflation to slow US oil production growth.

The Biden administration’s conflicting references to the US oil and gas industry, with its frequent blaming of the sector for higher gasoline prices, and the threat of more taxes recently, are not motivating US producers either. Many are reluctant to commit to spending more on exploration when there is no medium-to-long-term vision of how US oil and gas resources can be used to enhance America’s energy security and help Western allies that depend on imports.

Oil production growth forecasts have been lowered

This year, the US Energy Information Administration (EIA) and many analysts have lowered their forecasts for crude oil production for 2022 and 2023. Although the EIA still expects production to set a new average annual record next year, it has significantly revised it . Projections since the beginning of this year.

Oil company executives, for their part, say that the US administration’s policies and anti-oil rhetoric, inflation, contractor backlogs and regulatory uncertainty are negatively affecting drilling and production planning.

The Energy Information Administration expects U.S. crude oil production to average 11.7 million barrels per day in 2022 and 12.4 million barrels per day in 2023, which could exceed the record set in 2019, in November. Short term energy forecast.

Although a record output is expected next year, the EIA has lowered the numbers several times in 2022 so far. The latest cut represents a whopping 21% drop in the growth estimate, according to calculations he made Reuters.

in October weather forecastThe Energy Information Administration had already lowered its average production estimate for 2023 to 12.4 million bpd from a September forecast of 12.6 million bpd.

“The lower crude oil production forecast reflects lower crude oil prices in Q4 2022 than we previously expected,” management said in October.

Weeks before Russia’s invasion of Ukraine, which upended global energy markets, Enverus Intelligence Research is expected US oil production growth will accelerate in 2022 above about 900,000 barrels per day.

However, inflation and supply chain delays from the second quarter onward have exacerbated the outlook for US crude oil production growth. Envirus Intelligence Research (EIR) Cuts Its forecast this month for US production growth, due to “headwinds created by oilfield services constraints, the risk of stagnation and lower performance from recently drilled wells in the Permian Basin.”

Therefore, the bottom 48 oil production forecasts have been significantly lowered and the EIR now expects growth of about 450,000 barrels per day of exits and exits in 2022 and 560,000 barrels per day in 2023.

‘OPEC back in the driver’s seat’

A senior industry executive said last week that the US shale patch is no longer the swing oil producer and that OPEC is back as the most important driver of oil supply fundamentals.

Shale was seen as a swing product, and the Saudis and OPEC have been waiting for it. Now, OPEC is really back in the driving seat as they are the swing producers,” John Hess, CEO of Hess Corp. He said At a conference in Miami last week.

The executive believes U.S. crude oil production will average 13 million barrels per day over the next few years, as it will level off as investors pressure U.S. oil companies to focus on returning money to shareholders rather than investing in aggressive growth strategies.

The current state and prospects of the US oil industry contrast starkly with the growth of the decade through 2019.

Between 2009 and 2019, US producers accounted for all of the world’s increased consumption in three out of every 10 years and at least two-thirds of the increased consumption in six of those years, according to estimates By Reuters Chief Market Analyst John Kemp.

“US liquids production increased by 10 million barrels per day from 2011 to 2022, capturing a barely unbelievable 10% of global supply in the process,” Wood Mackenzie He said Last month. Nearly 6 million barrels per day of that increase came from the production of the lower 48 crude and condensate, with two-thirds from the Permian Basin alone, while the remainder of the increase is natural gas liquids produced from shale gas.

executives said Dallas Federal Energy Survey for the third quarter. The shale correction points to labor and equipment shortages, as well as the inconsistent policies of the Biden administration, as the main obstacles to expanding drilling activity.

Management’s lack of understanding of the oil and gas investment cycle continues to result in inconsistent energy policies that contribute to higher energy costs. An executive at an oilfield services company said comments to scan.

“We are in an energy death spiral that will lead to higher highs and lower lows. Volatility will increase, and the public will be on a very difficult path.”

By Tsvetana Paraskova for Oilprice.com

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