By ,Oil Editor | MRT | Crude prices have spent much of the year on the decline after peaking at over $77 a barrel, sinking to a low of $58.21 a barrel at the end of April before rising to a range of $62.17 to $63.39 as of Sept. 10.
As prices were affected by OPEC+ ending production cuts, tariffs, and geopolitical tensions, people began to wonder what would happen if oil prices remain lower for longer.
That was the topic of an analysis recently from Primary Vision, a data and analytics firm.
Despite falling oil prices, the company notes that U.S. oil production remains at a record high of 13.6 million barrels per day. Active drilling rigs are down almost 10% year-over-year and capital expenditure cuts total nearly $1.8 billion, suggesting “survival, not expansion, is the industry’s playbook.”
“So far, the story of U.S. shale has been one of resilience and consolidation. When we look at the Frac Job Count — that refers to the actual number of completions — we see that it has held strong. It is only down by 19 on a year-over-year basis. It means that even with a significantly lower oil price, U.S. shale has maintained production,” Osama Rizvi, energy and economic analyst at Primary Vision, told the Reporter-Telegram.
That observation is supported by the Energy Information Administration, which reported production in the Permian Basin has actually increased in recent months despite falling rig counts, he added.
“I think the industry is cutting down some extra weight — workforce, equipment, etc. — and that is precisely the reason I believe it will weather this downward cycle,” he said.
Rizvi’s comments came just after the Organization of Petroleum Exporting Countries and allies agreed to further increase oil output by 137,000 barrels per day in October, following increases of 555,000 barrels per day in September and 411,000 barrels per day in June and July. The organization has already restored 2.5 million barrels of production cuts and the October barrels are the first step in restoring 1.65 million barrels per day of production cuts.
“The OPEC+ dynamic is very interesting,” Rizvi said. “We need to realize that, so far, their poses haven’t translated into an actual increase in production. This can be observed as only the production ceilings have increased but not actual exports. So, we will need to wait for that to happen. Even if it does and prices go down to $50, shale will hold its ground. Production may not increase and the lower for longer price environment will come with its challenges — winners and losers. But once again, I believe it will make the industry stronger.”
Story Credit: By ,Oil Editor | MRT | Midland Reporter Telegram
