Stalled Growth Spurs Questions for US Shale

US oil production has rebounded from its Covid-19 lows, but now seems to be bumping up against significant constraints that will limit further growth. Despite strong oil prices, US drilling and fracking activity has flatlined since mid-June, with the oil rig count stuck at about 600. Several market impediments have emerged, while a dramatically changed shale industry, now laser-focused on cash returns, is behaving much differently than before the pandemic. Some experts are scaling back previously aggressive production forecasts. Decent growth is still likely for the next couple of years, but the sector could then stall. Back in April, the US Energy Information Administration (EIA) had expected the US to add 800,000 barrels per day in crude production this year for an average of 12 million b/d, and another 900,000 b/d in 2023. Others predicted growth as high as 1 million b/d this year. These are now being cut back to more modest numbers. Energy Intelligence, by contrast, has consistently forecast the US would add 600,000 b/d this year to average around 11.8 million b/d, followed by a gain of 750,000 b/d in 2023. After recent revisions, the EIA’s forecast is now in line with this. Such growth is still impressive, particularly after US output dropped below 10 million b/d at the height of the Covid-19 pandemic in 2020. In addition, the US will add about 450,000 b/d in natural gas liquids (NGLs) this year and roughly the same amount in 2023, with NGLs output expected to exit 2023 at 6.6 million b/d, according to our forecast. Taking into account all liquids, the US remains a force in global supply in the near term.