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Global Shale Revolution On Hold

March 21, 2015

Global Shale Revolution On Hold

Along with the rest of the energy world, we have been closely tracking rig counts (now down 40 percent from last fall) and other data to try to determine where the oil markets are heading. This week, the Energy Information Administration reported that production is finally set to decline in several key U.S. shale regions; a long-awaited development. The Eagle Ford, Bakken, and Niobrara shales are expected to see a combined 24,023 barrel-per-day decline in production in April, the first significant dip in output since oil prices collapsed last year. The monthly data may be a bit obscured by the fact that the Permian basin is expected to see production increases of 21,254 barrels per day. Overall, total U.S. production may stay flat. There is still a great deal of uncertainty about the next few months, but with declines beginning in the Eagle Ford and Bakken especially – two critical regions that drove the U.S. shale revolution – there appears to be light at the end of the tunnel for the oil glut.

The Federal Reserve caused a bit of a ripple in the oil markets this week when it appeared to slightly slow plans to raise interest rates later this year. The Fedlowered its estimate for the federal funds rate this year and next, an indication that it will not let its foot off of the gas pedal in terms of loose money. With low inflation and still room for labor markets to heal, the Fed sees no reason to pull back too quickly. Loose monetary conditions push up oil prices, so WTI and Brent rallied a bit this week on the news (after falling significantly). WTI closed out the week around $45 and Brent at $55 per barrel.

 

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