From October to November, the EIA estimates total new-well oil production in the seven largest energy-producing regions to increase in the Niobrara, Bakken and Eagle Ford fields while staying virtually flat everywhere else. For new-well gas production, an increase in the Marcellus field compares to modest gains elsewhere. Overall, the rig-weighted average was only 2 barrels and 159 thousand cubic feet a day, respectively. DUC figures were generally down, apart from an increase of 52 DUC wells in the Permian field.
But while new wells are still being drilled, production overall is forecast to fall by 60 thousand barrels per day, offset only by a 30 thousand increase in the Permian, for a net loss of 30 thousand barrels. Equally, natural gas production is set to fall by 309 million cubic feet, offset only by increases in the Marcellus and Permian for a net decline of 178 million cubic feet a day.
The key take-aways from this data are the on-going downward trend in American crude oil production, which has fallen from a high in 2015, as well as the sudden drop in natural gas production
Higher crude oil prices, which now seem likely to stay above $50, at least until the outcome of the planned OPEC freeze in November becomes clear, could help U.S. production recover in 2017. Natural gas output has been
A key driver of increased natural gas demand is the cold: winter rolls around and demand for heating gas goes up. But after the mild winter of 2015-2016, the EIA expects a more normal winter this year, with a commensurate increase in natural gas demand. Their figures are based on the National Oceanic and Atmospheric Administration (NOAA), which expects temperatures to be 3 percent higher than the average of the previous ten years, but lower than last year. Climate change and higher temperatures make that an uncertain prospect, however. It’s possible that freak weather systems, shock storms and unexpected heat waves (including one currently in the American South and Texas, where temperatures remain in 90 degrees Fahrenheit in the middle of October) could send heating gas figures swinging up and down.
Even with increased new-well efficiency, and the vitality of the Permian and Marcellus plays, could a more general decline in natural gas demand be in the offing? A recent analysis
The EIA snap-shot highlights the efficiencies that American drillers are bringing to the biggest natural gas and oil plays. But the numbers show the on-going uncertainty in the immediate market. Somehow, production will fall then spike up again (to where the EIA predicts they will average over 80 bcf for 2017). Consumption, which may falter initially, will also shoot up, assisted by healthy demand for American LNG overseas. Prices, according to the EIA, will average just $3.00 MMBtu, yet today, due to tight supply, prices are going up to $3.30 MMBtu and may go up further as production continues to fall…unless production rises again, as the EIA seems to expect.
I’m inclined to agree with
By Gregory Brew for Oilprice.com
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