U.S. Oil Decline Accelerates In April

A post by Ovi at peakoilbarrel

All of the oil (C + C) production data for the US states comes from the EIAʼs Petroleum Supply monthly PSM. At the end, an analysis of three different EIA monthly reports is provided. The charts below are updated to April 2020 for the 10 largest US oil producing states.

This US production chart is updated to April and tentatively extended to May and shows the continuous slow decline in oil output from US oil fields from November 2019 to March 2020 and then the sharp acceleration in April and May. Since the current EIA data is two months delayed, April is the first month that shows the combined effects of the pandemic and low oil prices.

March output was 12,730 kb/d, revised up by 14 kb/d from the May release. The orange square is both a projected and actual April output. April output according to the EIA’s release is 12,061 kb/d, a drop of 669 kb/d from March. For comparison purposes, the 12,143 kb/d was taken from the late June Monthly Energy Review. It is too high by 82 kb/d. The early June STEO projected April US output of 12,380 kb/d, much higher than the MER and the latest EIA PSM report. Using the EIA’s weekly data, May drops to 11,419 kb/d, red dot.

This weekly chart is updated to July 1, Canada Day, EH! The last two blue triangles represent output estimates from the late June MER for May (11,394 kb/d) and a 26-day average for June, respectively. The June average is 10,885 kb/d.

The weekly drop in US operational oil rigs is slowing and appears to be heading for a minimum in July. For the week of July 2, US oil rigs just dropped by three from the previous week. The slowing in the rig count drop appears to be reflected in the increased output in late June shown in the previous chart. Interestingly, over the past three weeks, Texas oil rig counts were almost flat, 97 (June 19), 98 (June 26) and 97 for the week of July 2.

Ranking Production From US Oil States

Listed above are the 10 states with production previously greater than 100 kb/d. This month Utah fell below 100 kb/d again but is retained for continuity. These 10 accounted for 9,788 kb/d (81.2%) of US production out of a total production of 12,601 kb/d in April 2020. US year over year production in April was negative and will continue negative going forward for many more months. Note that of all these 10 states, only one state, Colorado, had a monthly and yearly gain in April.

Not shown in the table is the GOM which produced 1,915 kb/d in April and would rank between Texas and North Dakota.

Production in Texas decreased by 234 kb/d to 5,200 kb/d in April. March was revised up by 10 kb/d to 5,434 kb/d.

From March 13 to July 2, the Texas rig count dropped by 296 or 72.5%. An output drop followed in April as shown in the previous chart. The above chart includes all rigs. Oil rigs fell from 379 in the first week of January to 97 in the week of July 2. Note that for the week of July 2, the rig count was flat at 112.

North Dakota’s oil production started to drop in November 2019 after peaking at 1,480 kb/d in October. However it increased in February only to resume its decline again in March and April to 1,214 kb/d. In the March POB report, Helms provided an output estimate for April of 1,048 kb/d. It was too low by 166 kb/d. The April decline was smaller at 195 kb/d, not the 361 kb/d projected by Helms.

The North Dakota oil rig count has held steady at 10 for the weeks of June 19 to July 2.

New Mexico increased its production in March by 14 kb/d to 1,108 kb/d. However, April saw an output drop of 26 kb/d, its biggest since July 2016, to 1,082 kb/d. It will be interesting to see what May brings.

From March 13 to July 2, New Mexico’s oil rig count dropped by 69 or 59% to 48. Increased production declines can be expected next month.

Oklahoma’s output rebounded in February after declining for four months in a row, but resumed its decline in March and April. April output dropped by 54 kb/d to 499 kb/d.

Colorado production increased by 2 kb/d in April to 493 kb/d. Colorado’s production dropped steadily since November 2019 until April’s reversal. Colorado was the only state to report a monthly gain in April.

Alaska production continues its annual summer decline. In April, output dropped 7 kb/d to 463 kb/d. The latest EIA weekly data for June shows output to be close to 362 kb/d. This is 20 kb/d lower than the August 2019 output of 382 kb/d

California’s slow output decline has resumed. April production was down by 12 kb/d to 409 kb/d. Over the last three years, the average decline rate has been close to 24 kb/yr.

Wyoming increased production by 6 kb/d to 283 kb/d in March but declined by 38 kb/d in April to 245 kb/d. During the week ending July 2, Wyoming had one oil rig in operation, down from a high of 20 in January 2020.

Louisiana’s output has been in decline since August 2019. In April production was down by 12 kb/d to 101 kb/d. In January 2020, on average, 22 rigs were operating while there was only 10 operating in the week of July 2, a drop of one from the previous week.

After the low in June 2016, Utah’s production peaked in Sept 2018 at 109 kb/d. Since then, output has been unsteady but with an overall decline. It declined by 13 kb/d to 96 kb/d from September 2018 to March 2020. In April, production dropped by another 14 kb/d to 82 kb/d. Utah’s oil rig count slowly climbed from four rigs in January to a peak of eight in the week of April 3. By the first week in May, no rigs were operational.

Over the past year, GOM output has kept bumping up against a production ceiling of 2,000 kb/d. In April output dropped by 16 kb/d to 1,915 kb/d.

Updating EIA’s Different Oil Growth Perspective

1) Drilling Productivity Report

The Drilling Productivity Report (DPR) uses recent data on the total number of drilling rigs in operation along with estimates of drilling productivity and estimated changes in production from existing oil wells to provide estimated changes in oil production for the five principal tight oil regions. The charts are updated to July 2020.

Above is the total oil production from the seven basins that the DPR tracks. Note that the DPR production includes both LTO oil and oil from conventional wells/fields.

According to the June DPR report, LTO oil and conventional oil output peaked in November 2019 at 9,162 kb/d, revised down from the 9,181 kb/d estimate in the May report. The largest decline occurred in May, 811 kb/d. The projected output in July is 7,634 kb/d, down 91 kb/d from June. The contributions to the output decline from the four major basins are shown In the charts below.

Permian output in July is projected to be essentially the same as June, 4,263 kb/d, down 7 kb/d.

Eagle Ford’s May drop was 125 kb/d. July’s drop is projected to be a much smaller 28 kb/d to 1,174kb/d.

The Bakken is projected to have two big output drops. April declined by 197 kb/d and May declined by 207. July output is expected to be 998 kb/d, 5 kb/d lower than June. It is interesting to note that the North Dakota output for April was down by 195 kb/d, very close to the DPR estimate.

Niobrara output is expected to drop by 25 kb/d in July to 613 kb/d.

2) Light Tight Oil (LTO) Report

The LTO database provides information on LTO production from seven tight oil basins and a few smaller ones. These charts are updated to May 2020.

May’s total LTO output is expected to decline to 7,102 kb/d from 7,806 kb/d, a drop of 704 kb/d.

Permian output in May is projected to be 3,750 kb/d, a drop of 328 kb/d from April’s 4,078 kb/d, close to half of the total LTO decrease.

This chart shows that conventional oil in DPR basins is also being shut in. The chart was obtained by taking the difference between the DPR and LTO production estimates up to May 2020. From Mar-20 to May-20, conventional oil in DPR basins fell by 117 kb/d, or 12.3%. Overall DPR production fell by 12.5% over the same time period.

3) Short-Term Energy Outlook (STEO)

The STEO provides projections for the next 13-24 months for US C + C and NGPLs production. The June 2020 report presents EIA’s oil output projections out to December 2021.

The June STEO report has revised its April output projection down from its earlier report.

The STEO is projecting a major drop of 1.98 Mb/d in US L-48 production from March 2020 to October 2020. Note how the June STEO output projection has dropped by a further 200 kb/d to 400 kb/d in the October 2020 to March 2021 time frame compared to April’s estimate. While the STEO is showing fairly steady drop from March to October, the projection from October to March 2021 appears to be more tentative and further revisions should be expected over that time. Comparing March 2020 output with December 2021, the decrease is reduced to 1.61 Mb/d as production slowly begins to rise, starting in early 2021.

Now that the price of WTI has moved closer to $40/b, it appears that the STEO March projection is closer to the early July price of $40/b than its May estimate, which was issued on May 12th when oil was $25.78/b. The June STEO was released on June 9 when WTI was in the $37/b to $39/b range.

World oil production increased by 48 kb/d in March 2020 to 82,336 kb/d.

Original post

Editor’s Note: The summary bullets for this article were chosen by Seeking Alpha editors.

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