Shale giant sees ‘ significant’ decline in U. S. oil production
HOUSTON Global oil watchers are in for a big surprise in the next few months, according to the chief executive of the biggest shale producer: U. S. crude production is going to fall “significantly.”
A two- month lag in government data has kept market observers from seeing that U. S. output is finally in a downward spiral, Bill Thomas, chairman and CEO of EOG Resources Inc., said Friday in a call with investors. Major declines will continue every month through the end of the year although it won’t be apparent until September when the data is out, he said.
“U. S. oil production will have significant month over month declines in the second half of this year,” Thomas said. As that trend continues into 2016, “we could see a bit more firmness in the price.”
For the year, EOG, one of the dominant producers in the three biggest shale formations, sees output rising between 500,000 and 600,000 barrels a day from 2014 levels, Thomas said. The U. S. Energy Information Administration has forecast higher growth to about 9.5 million barrels a day, from 8.7 million last year.
While the number of active oil
rigs in the U. S. has plummeted by almost 60 per cent from a year ago, producers have been putting some back to work recently.
Drillers added rigs in U. S. oilfields for the fifth time in six weeks. Rigs targeting oil in the U. S. rose by six to 670, Baker Hughes Inc. said on its website Friday. The Permian Basin in West Texas was once again the big winner, climbing for a sixth straight week, with five crude rigs added for a total of 252. None of the four major U. S. oil plays lost rigs this week.
West Texas Intermediate, the
U. S. benchmark, tumbled 21 per cent in July. On Friday, WTI fell 79 cents to settle at $ 43.87 p. m. on the New York Mercantile Exchange.
A potential price rally next year would make it more profitable to boost drilling, a step Houstonbased EOG won’t take until crude sells at higher and more stable levels, Thomas said.
“We just can’t see a good business reason to outspend growing oil in an oversupplied oil market,” Thomas said. “This does not make sense to us. We believe we’ve made the right decision.”