Shale Set To Decline Substantially This Year
The International Energy Agency released its Medium Term Oil Market Report on February 22 at the IHS CERA Week conference in Houston, an annual confab for the elite of the oil industry. In its report, the IEA sees U.S. shale finally capitulating this year, falling by 600,000 barrels per day, plus another contraction of 200,000 barrels per day in 2017. By then, oil prices should rebound as supply and demand converge.
But, it won’t be the end of U.S. shale, the IEA says. “Anybody who believes that we have seen the last of rising LTO production in the United States should think again; by the end of our forecast in 2021,
total U.S. liquids production will have increased by a net 1.3 mb/d compared to 2015,” the IEA wrote decisively. LTO refers to “light, tight, oil,” or light oil from shale.
Related: Eagle Ford Struggles, But It’s Still The Sweet Spot
The near-term prospects don’t look so good, however. The Paris-based energy agency believes that crude oil markets will remain oversupplied throughout 2016, with the glut expected to be around 1.1 million barrels per day (mb/d). The supply overhang will disappear in 2017, but the extraordinary levels of oil currently siting in storage will delay a rise in oil prices.
The pain will be felt far and wide. Shale companies are slashing spending, laying off workers, and forgoing drilling plans in an effort to avoid bankruptcy. Collectively, OPEC has seen oil export revenues fall from a peak of USD$1.2 trillion in 2012 down to USD$500 billion in 2015. Revenues will further decline to just USD$320 billion this year.
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