Drillers pumping shale at full speed
With oil prices still above $60 a barrel, U.S. drillers see no reason to slow down, putting more pressure on OPEC and Russia
American frackers are cranking out crude oil in Texas, North Dakota and Colorado even faster, defying overseas rivals who have limited production to support oil prices.
A MERICAN frackers are cranking out crude oil in Texas, North Dakota and Colorado even faster, defying overseas rivals who have limited production to support oil prices.
On Monday, the Energy Department projected U.S. shale drillers will produce an additional 131,000 barrels a day to push output from the nation’s seven major shale plays to nearly 7 million barrels a day by April. The bulk of the increased production will come from the Permian Basin and the Eagle Ford Shale in Texas.
The forecast comes a week after the International Energy Agency, a Paris-based group that advises oil-importing countries, told energy executives in Houston that the U.S. will produce enough crude to satisfy 60 percent of global demand growth over the next five years.
It’s part of the second U.S. oil boom in a decade that could force OPEC and Russia to continue extending their Vienna alliance, a name analysts recently coined for the pact between the Organization of the Petroleum Exporting Nations and other major producers, led by Russia. The agreement, reached in Vienna, where OPEC holds its semiannual meetings, committed the participants to cumulative output cuts of 1.8 million barrels a day in an effort to elevate oil prices after a two-year downturn led to thousands of job cuts and scores of bankruptcies in Houston, the U.S. energy capital.
As crude prices have floated above $60 a barrel this year, analysts have rejiggered forecasts to show ever-increasing U.S. crude production. U.S. oil prices settled at $61.36 a barrel on Monday, down 68 cents — but still at a level that gives West Texas drillers an incentive to drill wells and order equipment for hydraulic fracturing, or fracking. Fracking pumps a mix of water, sand and chemicals into wells to crack shale rock and release oil and gas.
“We’ve increased our expectation for shale oil substantially this year because of the price stimulus and as technology improves,” Fatih Birol, executive
director of the IEA, said at the CERAWeek by IHS Markit energy conference in downtown Houston last week. “Our expectations may well need to be revised upwards if the prices are higher than we assumed.”
The IEA believes that at $60 a barrel, U.S. oil production will rise by 3.8 million barrels a day over the next five years to more than 13 million barrels a day. Over that same time period, the group estimates that global oil demand will grow by 6.4 million barrels a day.
OPEC members produced about 32.4 million barrels a day in February, down 70,000 barrels a day as Venezuela’s oil production continues to decline, according to S&P Global Platts, a provider of commodities information and analysis.
Venezuela’s output has dropped seven months in a row to 1.57 million barrels a day, the lowest level in decades, as its cash-strapped national oil company, PDVSA, struggles to pay for chemicals it needs to extract the country’s heavy crude, according to Platts.
“Analysts expect further declines,” Platts said in a report last week, “which could be exacerbated if the U.S. imposes additional sanctions that hamper PDVSA's ability to export crude, import (chemicals) or refinance its debt, as the Trump administration is considering.”
The outlook couldn’t be more different in the United States. On Monday, the Energy Information Administration projected that West Texas oil producers in the Permian will flow an additional 80,000 barrels a day by April, and in the Eagle Ford in South Texas, they’ll pump another 23,000 barrels a day.
That’ll bring output in the Permian, which stretches across West Texas and eastern New Mexico, to 3.16 million barrels a day. Production there crossed the 3 million barrel-a-day mark last month, according to revised Energy Department figures.
In the Eagle Ford, production will climb to 1.33 million barrels a day. The Bakken Shale in North Dakota and the Niobrara, most of which is in Colorado, will raise production by another 12,000 barrels a day.
All told, the seven major U.S. shale plays will pump 6.95 million barrels a day.
“U.S. oil will put its stamp on global oil developments in the next five years,” Birol said.