(Bloomberg) — Expansion in the US shale patch has come to an end for now with oil output set to shrink for a second straight month in September, according to a government report.
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After topping out with record crude production in July, the US is on track for its first two-month decline since January 2022, according to a Monday report by the US Energy Information Administration. The drop is led by the Permian Basin in West Texas and New Mexico, where output will fall for a third month to 5.8 million barrels a day, its lowest level since February. The Permian had been the last of the four US shale basins to drive growth in overall US production.
The decline will add more tightness to global supplies, which are slipping in the wake of production cuts from Saudi Arabia and its OPEC+ allies. Meanwhile, the International Energy Agency said Friday that global oil demand has reached a record and warned that oil prices could climb further.
Explorers have been dialing back US activity as growth in global oil demand returned slower than executives thought it would. The slowdown is also being driven by closely held explorers that are running out of inventory for drilling new wells. The oil rig count has fallen 15% so far this year.
Oil producers also continue to drive the so-called fracklog lower as completion activity outpaced drilling in July, according to the drilling productivity report. The last time explorers added to the supply of drilled wells waiting for frack crews was in December. The lower the count goes, the longer it will take for shale supply to return. ©2023 Bloomberg L.P.