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New EIA Report Reveals Massive Downward Reductions In US Shale Oil Output
New EIA Report Reveals Massive Downward Reductions In US Shale Oil Output
Readers will recall that, for the last several months, I have noted that US oil production per the EIA’s weekly Petroleum Status Report was inconsistent with the data from the EIA’s monthly Drilling Productivity Report (DPR)
The graph below shows that state of play as of last week. The two red arrows at right show the contradictory trends, with total oil production essentially flat while shale oil production is shown rising at a healthy clip. I have noted that this contradiction would have to be resolved by either increasing the weekly numbers or reducing shale oil output.
We now have the answer.
The graph below shows the state of play as of March 14th, when the EIA issued the March DPR. It shows simply massive downward reductions in US shale oil output. In the March report, shale oil output from the key plays is reduced by 443,000 bpd for January and 250,000 bpd for February. If we go back one more month to the January DPR, shale oil production has been reduced by 542,000 bpd for December 2022. This is a huge revision, more than 4% of total US crude and condensate production over a two month period.
With this revision, as the current graph (below) shows, US shale oil production is largely flat over the last four months, and trends in shale oil supply are consistent with the overall US crude oil supply (including conventional onshore wells, Gulf of Mexico offshore, and Alaska). I need hardly point out that this is not good news, as the visible peak of horizontal oil rigs is now beginning to pair up with plateauing oil production, just as we would expect.
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Pioneer CEO Sheffield Warns U.S. Shale Is Unable to Grow Much More
Pioneer CEO Sheffield Warns U.S. Shale Is Unable to Grow Much More
(Bloomberg) — U.S. shale lacks the capacity to come to the rescue of consumers battling sky-high energy prices with much more crude production, says the boss of the Permian Basin’s biggest oil explorer.
Only OPEC countries like Saudi Arabia and the United Arab Emirates have the ability to meaningfully increase production fast in the wake of supply shortages, Pioneer Chief Executive Officer Scott Sheffield said on Bloomberg TV. U.S. shale, the world’s oil growth engine for the past decade, is constrained by labor shortages and demands by shareholders to return cash, he said.
“Several other producers are having trouble getting frack crews, they’re having trouble getting labor and they’re having trouble getting sand; that’s going to keep anybody from growing,” Sheffield said. “If the president wants us to grow, I just don’t think the industry can grow anyway.”
Surging oil prices that many on Wall Street now expect to reach $100 a barrel have been a major cause of concern for governments confronting voter discontent over a higher cost of living. Most notably, U.S. President Joe Biden, has criticized American drillers for not producing more and has released crude from strategic reserves in a bid to ease gasoline prices at the pump.
Also See: Permian Roughneck Shortage Clouds Outlook for Oil Output Growth
Crude prices have surged 40% since early December to more than $90 a barrel as rising global demand and geopolitical concerns increase due to tensions between Russia and Ukraine. But don’t expect U.S. shale to increase production to ease shortages, Sheffield said.
“If Russian oil is sanctioned, or if Russia decides to stop exporting, then it’s going to be up to the Saudis and UAE to decide whether to break the pact and increase production,” he said.
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Why Isn’t U.S. Shale Production Soaring?
Why Isn’t U.S. Shale Production Soaring?
- With oil prices threatening to break $100 this year, many observers are confused by the lack of a U.S. shale boom.
- The major reason that U.S. shale companies are reluctant to boost production at all costs is that they need to keep shareholders happy first and foremost.
- Other issues include cost inflation and the shrinking number of sweet spots for them to tap.
A lot of news has been coming lately from the U.S. shale patch. Output in the Permian has broken records for two months in a row. The Energy Information Administration has forecast that the U.S. total could also break a record this year, thanks to higher prices.
But is this news good enough?
The rig count is on the rise; there is no question about it. Output is also on the rise. Yet, according to industry executives, this does not necessarily equate to a return to business as normal. On the contrary, it seems that most of the industry is determined to stick to its financial discipline and keep returning cash to shareholders instead of boosting production.
In an interview with the Financial Times, the chief executive of Devon Energy said that shareholders are, on the whole, still skeptical about production increases, and companies are heeding this sentiment.
“In the back of everyone’s minds is, ‘When is it going to be [production] growth? . . . We have investors saying ‘My gosh, if not now, when?’” Rick Muncrief told the Financial Times. “But for every one saying that, there’s at least one other if not two others waiting to say, ‘Gotcha! We knew that discipline would be shortlived.’ We have learned our lesson,” he added.
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Running Out Of Sweet Spots: Shale Growth May Not Materialize
Running Out Of Sweet Spots: Shale Growth May Not Materialize
- U.S. shale drillers are looking to boost production in the short term
- Industry data suggests that well depletion is advancing
- Drillers remain upbeat about the short term forecast for shale oil production
During the last shale oil boom when producers were racing to see who could pump the most the fastest, some experts warned that shale oil had a flaw that would come to haunt these producers: wells were quick to start producing but also quick to deplete. Now, industry data suggests that the depletion is advancing. The Wall Street Journal’s Colin Eaton cited reserve inventory data from the shale patch in a recent analysis that pointed to a stable decline that may be irreversible. Eaton also quoted industry executives as making plans for such an irreversible development.
That fossil fuels are finite is no news. It was one of the main arguments in previous renewable energy pushes before emissions became the number-one priority. Technologically, oil and gas resources can be stretched to near infinity as drilling technology advances further and further. Yet this happens at a cost, and it seems that for the time being, the U.S. shale oil industry is not convinced it’s worth paying that cost.
It is this decline in cheaply available oil that is forcing U.S. shale drillers to stay disciplined, the WSJ’s Eaton wrote, despite rising oil prices: West Texas Intermediate is trading at over $90 per barrel for the first time since 2014.
“You just can’t keep growing 15% to 20% a year,” Pioneer Natural Resources Scott Sheffield told Eaton. “You’ll drill up your inventories. Even the good companies.”
Despite this, Chevron and Exxon are planning a substantial boost in the Permian—the most prolific play in the U.S. shale patch and the focus of much industry attention—amid higher prices.
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Here’s the Fracking Truth About America’s Last Fossil-Fueled Hurrah
Here’s the Fracking Truth About America’s Last Fossil-Fueled Hurrah
In order to recover the abundance of these fuels that the EIA claims will be there for the taking, between now and 2050 the industry will need to drill something on the order of 700,000 new wells at a total cost of over $5 trillion.
As global leaders struggle to tackle the climate crisis, and as ordinary people worldwide are increasingly whiplashed by high fuel costs, the US government is promising policymakers, industrialists, and investors that there will be decades of growing supplies of fracked oil and natural gas. However, an independent earth scientist with 32 years of experience with the Geological Service of Canada is using the industry’s and government’s own data to show why that’s a dangerous fallacy.
Hughes has just issued his latest, Shale Reality Check 2021, and it provides an invaluable, comprehensive, yet detailed view of the past, present, and future of tight oil and shale gas.
During the past decade, Post Carbon Institute has published a series of reports by earth scientist J. David Hughes on the status of US shale gas and tight oil resources and production (i.e. natural gas and oil that are extracted using hydraulic fracturing, also known as fracking). These reports are remarkable for their technical depth and thoroughness, and are frequently referenced by climate activists, energy investors, and industry insiders. Hughes has provided a necessary counter to the US Energy Information Administration’s (EIA) typically over-optimistic projections, which often echo hyperbolic claims by the industry. Indeed, Hughes’s reports, which address forecasts contained in the widely-cited EIA Annual Energy Outlook, may justify calling him “the people’s shadow EIA.” Hughes has just issued his latest, Shale Reality Check 2021, and it provides an invaluable, comprehensive, yet detailed view of the past, present, and future of tight oil and shale gas.
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U.S. shale oil and gas forecast: Too good to be true?
U.S. shale oil and gas forecast: Too good to be true?
Earth scientist David Hughes—who is out with a new skeptical report on the future of U.S. shale oil and gas—has two very important things in common with Michael Burry. Burry is the investor made famous by The Big Short, the book that was later turned into a movie of the same name about the 2008 housing crash.
Both men made calls that contradicted an almost unanimous consensus, and both did so after dogged, painstaking research.
First, let’s look at the latest from Hughes, an update on the U.S. shale oil and gas industry entitled “Shale Reality Check 2021.” Then, we’ll return to his previous prescient call.
“Shale Reality Check 2021” seriously undermines rosy long-term forecasts made by the U.S. Energy Information Administration (EIA) for U.S. oil and natural gas from shale deposits. This matters because the EIA’s forecasts are counting on shale for 69 percent of all U.S. oil production from 2020 to 2050 and 77 percent of all U.S. natural gas production in the same period. And, it matters to the world because between 2008 and 2018, growth in U.S. oil production accounted for 73 percent of the entire growth in global supplies. (Oil from shale deposits is properly known as “tight oil,” a type of oil also found in other kinds of rock. Natural gas from shale deposits is typically referred to as “shale gas.”)
Hughes’ conclusions are based on commercially available drilling and production data. Here are his overall findings:
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- Of the 13 major plays he evaluated, Hughes rates the EIA’s production forecast for five as “moderately optimistic,” five as “highly optimistic,” and three as “extremely optimistic.” The EIA forecast for the Wolfcamp Play, the largest tight oil play, is rated as “highly optimistic.” The forecast for the Marcellus Play, the largest shale gas play, is rated as “moderately optimistic.”
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Why U.S. Shale Won’t Go To War With OPEC+
Why U.S. Shale Won’t Go To War With OPEC+
- OPEC+ will be very happy with where oil prices currently are and is unlikely to change its course anytime soon
- The U.S. does have the ability to increase production, but U.S. shale does not have support from either the government or shareholders to boost production significantly
- The two bearish variables that could drag prices down in the near term are a strong dollar and the continuation of inventory builds
For years, the Kingdom of Saudi Arabia’s economy has suffered from low oil prices. Since 2014 when it increased supplies to try and break American shale producers, Saudi Arabia has had to struggle with a flooded market. Its cash reserves have been drawn down by hundreds of billions and it had to sell a small percentage of its prize asset, Saudi Aramco. At the same time, Saudi Arabia’s Vision 2030 plan fell behind in its lofty goals of diversifying its economy. I discussed this at some length in a prior Oilprice article. Now with the price of Brent – the benchmark against which Saudi Arabia prices its production – finally back above the $80 mark, the Kingdom is beginning to refill its coffers. So it was no great surprise when the Saudis and the Russians, the two principal members of the OPEC+ cartel, roundly rejected a demand from President Biden to increase production to ease the world’s energy crisis.
Up to this point, there had been some lingering concern on the part of OPEC+ that too high a price would reinvigorate the shale industry that had finally come to heel in early 2020. Restraint on the part of shale drillers since then has encouraged them that a new “war” for market share won’t be the result…
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The Oil Omen: First Large U.S. Shale Driller To Pledge Flat Output In 2022
The Oil Omen: First Large U.S. Shale Driller To Pledge Flat Output In 2022
- Diamondback said it planned to pump some 221,000 to 225,000 barrels of crude daily. For full 2021, Diamondback said production would come in at between 222,000 to 223,000 bpd
- Most large shale drillers are adopting the same approach in order to keep their shareholders happy after years of burning cash to boost production to a maximum
Diamondback Energy has said it will not increase its crude oil production next year despite the surge in prices.
In the release of its third-quarter results, Diamondback said it planned to pump some 221,000 to 225,000 barrels of crude daily. For full 2021, Diamondback said production would come in at between 222,000 to 223,000 bpd.
“As we move into 2022, we are still seeing excess oil supply and varying demand recovery profiles across the globe. As such, we remain committed to capital discipline and our plan to return excess Free Cash Flow to our stockholders,” said the company’s chief executive, Travis Stice, echoing a widely shared attitude in the shale oil and gas industry.
“Therefore, we are committing to maintaining our fourth quarter 2021 Permian oil volumes throughout next year and we believe this can be accomplished by spending the amount of capital implied by our fourth quarter 2021 guidance run-rate,” Stice also said, noting this approach would allow the company to return more cash to shareholders, pay down more debt, and maximize free cash flow.
Most large shale drillers are adopting the same approach in order to keep their shareholders happy after years of burning cash to boost production to a maximum. While this new approach of restraint is welcomed by shareholders, the general public—and drivers specifically—have no reason for joy.
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Shale oil and gas fraud: A sign of a peak in oil supplies?
Shale oil and gas fraud: A sign of a peak in oil supplies?
Those of us who watched incredulously as investors shovelled more and more money into what we were sure were money-losing shale oil and gas drillers do not find the current spate of fraud lawsuits against these drillers surprising.
The gargantuan claims about shale hydrocarbon reserves—which were compared more than once to those in Saudi Arabia—were clearly designed to woo investors into bidding up the stock price and/or hoovering up the constant stream of junk bonds emitted by the shale oil and gas drillers. The hype succeeded for a long time, even during the crash in oil prices in 2015 and beyond when investors convinced themselves that they were picking up “bargains.”
It wasn’t until the pandemic-induced plunge in oil prices that the reality of those outlandish claims was revealed, and many companies disappeared.
But this story of fraud and exaggerated claims is much more than a legal story. The large production gains that did take place in American oil fields had people believing America would be or already was “energy-independent,” a phrase that meant the country would not be a net importer of energy resources. Though U.S. dependence on imported energy resources did decline, it didn’t reach zero until the pandemic dramatically crashed U.S. oil demand below U.S. production. But as the world and U.S. economies rebound, that dependence is almost certain to return as the so-called “shale miracle” turns out to be something less than miraculous, bankruptcies continue and reserve estimates come back into line with reality.
But the fallout extends even further. The U.S. oil boom was the principal source of increased world production for most of the last 15 years. Without that boom and the boom in the Canadian tar sands, world oil production would have grown little or even declined.
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Shale Giants Proving OPEC Right

Saudi Arabia’s bet that the golden age of U.S. shale is over appears to be a safe one – for now, at least.
(Bloomberg) — Saudi Arabia’s bet that the golden age of U.S. shale is over appears to be a safe one — for now, at least.
A round-up of data on shale drillers shows they’re sticking to their pledge to cut costs, return money to shareholders and reduce debt. If they stay the course, it would validate the OPEC+ alliance’s high-stakes wager that it can curb output and drive crude prices higher without unleashing an onslaught of supply from U.S. rivals.
That’s still a big “if,” one that’s keeping the oil market on edge as crude’s rally makes it more tempting for shale producers to go back on their word. But the U.S. shale patch is showing little sign of a true comeback so far, and even a dramatic boost in activity would leave oil output below pre-pandemic levels until late next year. Drillers that have shown signs of straying from the script and boosting production have been punished by investors.
Publicly traded explorers that are remaining disciplined on output are helping to keep crude prices aloft, said Michael Tran, managing director for global energy strategy research at RBC Capital Markets. The motives of closely held producers, on the other hand, remain “an open-ended question,” he said. The number of oil rigs has already jumped 80% after bottoming out in August, Baker Hughes data show.
The more restrained shale drillers are this year, “the more they can potentially grow production at higher prices next year and beyond,” Tran said.
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Bloomberg, M.Tobin, D.Wethe, K.Crowley, oil price, oil, crude oil, saudi arabia, shale oil, opec+, rigzone.com
Has oil peaked?
There was fierce controversy in the first decade of this century over claims by petroleum geologists and energy commentators that peak oil was imminent (I was a figure in that debate, writing several books on the topic). Most of those early claims were based on analysis of oil depletion and consequent supply constraints. BP, however, is talking about a peak in oil demand—which, according to its forecast, could fall by more than 10 percent this decade and as much as 50 percent over the next 20 years if the world takes strong action to limit climate change.
Source: PeakOilBarrel.com; production in thousands of barrels per day.
Numbers from the US Energy Information Administration’s Monthly Review tell us that world oil production (not counting biofuels and natural gas liquids) actually hit its zenith, so far at least, in November 2018, nearly reaching 84.5 million barrels per day. After that, production rates stalled, then plummeted in response to collapsing demand during the coronavirus pandemic. The current production level stands at about 76 mb/d.
Many early peak oil analysts predicted that the maximum rate of oil production would be achieved in the 2005-to-2010 timeframe, after which supplies would decline minimally at first, then more rapidly, causing prices to skyrocket and the economy to crash.
Those forecasters were partly right and partly wrong. Conventional oil production did plateau starting in 2005, and oil prices soared in 2007, helping trigger the Great Recession.
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How much oil left in America? Not much
How much oil left in America? Not much
Preface. If you think we have no worries because we can get arctic oil, think again. We can’t because icebergs mow drilling platforms down in the ocean. On land, massive amounts of expensive new drilling rigs, roads, rail lines, platforms, buildings and other infrastructure need to be built, and maintained every year as permafrost soil bucks and heaves like a bronco trying to shake infrastructure off.
In the first two oil shocks in the 1970s, many intelligent people proposed we should buy oil from other nations to keep ours in the ground for when foreign oil declined. But hell no, Texas, Oklahoma, and other oil states said that we need jobs and CEO/shareholder profits more than national security. Over half of all remaining oil is in the Middle East, which China, Russia, and Europe are much closer to than the U.S.
What saved the U.S. and the world, from conventional peak oil and natural gas decline since 2005 is fracking. But fracking began to decline as early as 2020 according the first report below. The second article is about oil discoveries in the U.S. declining.
This just in: John Hess, CEO of Hess Corporation, told his audience that “key U.S. shale fields are starting to plateau” and will not the next Saudi Arabia. U.S. shale oil production has been a major driver in the growth of world oil supplies. Last year the United States accounted for 98% of global growth in oil production. Since 2008 the number is 73%. so a slowdown or decline in U.S. oil production growth would mean trouble for the whole world. With 81 percent of global oil production now in decline, even a plateau in U.S. production would likely result in a worldwide decline (Kobb 2020).
Peak Fracking in the news:
2020 U.S. Shale Oil Production – All That’s Left Is The Permian And That Won’t Last Forever Either.
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The End of Oil is Near, or Maybe Not
The “The End of Oil?” article describes weak oil demand in recent years although it should be stated that global oil consumption increased over 5 million barrels/day from 2015 to 2019. A major factor for weak oil demand growth in recent years is the increasing level of inequality in the U.S. and world. There is an increasing population that can’t afford to buy oil distillates, or the devices that use them. Oil distillates offer the ability to avoid manual physical effort which people tend to select when they can afford to.
“The End of Oil?” article emphasized the increase in global oil production in recent years. Most of that production increase was associated with unconventional oil resources such as shale oil in the U.S. and oil sands in Canada. The problem with those unconventional oil resources is that they are considerably more expensive to produce compared to conventional oil. Conventional oil production is declining over much of the globe which has forced oil companies to move to unconventional resources.
The author describes oil majors, like ExxonMobil and Chevron, as getting into the shale oil business in recent years. That is not a wise business decision but due to the lack of new conventional resources to exploit.
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