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US oil and gas production program signs of flattening: Kemp

U.S. oil and gas production are finally revealing signs of flattening out as drilling rigs and well conclusion teams have been idled in action to the retreat in rates considering that the middle of 2022.

Across the country crude and condensates production was performing at practically 13.2 million barrels per day (b/d) in March 2024 according to the most recent data from the U.S. Energy Details Administration (EIA).

Nevertheless, there had been no net development given that October 2023, showing the surge in production after completion of the coronavirus pandemic and Russia's invasion of Ukraine had ended.

Production from the Lower 48 states excluding federal waters in the Gulf of Mexico was up by less than 0.5 million b/d in March compared with the very same month a year previously.

Growth had actually slowed from 0.9 million or 1.0 million b/d in the second half of 2023 as the incentive from the previous high costs in 2022 faded.

Chartbook: U.S. oil and gas production

Inflation-adjusted front-month U.S. futures rates pulled back to around $81 per barrel by December 2022 (50th percentile for all months since the start of the century) from a high of $124. in June 2022 (83rd percentile).

Production started to stabilise or pull back about 10-12. months later, in line with the historical relationship between. price and output changes.

Clear proof that U.S. oil production was turning over was. masked by uncommon weather in December 2023 and January 2024. distorting year on year comparisons.

However with the return of more typical weather in March 2024 the. lack of net growth over the last six months has actually become apparent.

OIL STABILISATION?

U.S. futures costs have balanced $73-78 per barrel in May. and June 2024, putting them in the 45-50th percentiles in real. terms for all months considering that 2000.

At these rates, there is no strong signal to increase or. decrease production.

The variety of rigs drilling for oil fell to an average of. just 497 in May 2024 from a cyclical peak of 623 in December. 2022.

If futures rates stay around existing levels, U.S. production is likely to remain essentially flat for the rest of. 2024 through at least the middle of 2025.

Lower costs and limited development in U.S. output would produce. area for Saudi Arabia and its OPEC? allies to reverse some of. their own production cuts later on this year and into 2025.

U.S. GAS PRODUCTION

The decrease in gas costs since the middle of 2022 has been. even more extreme and has actually brought all growth in production to a. halt.

Dry gas production balanced 102.6 billion cubic feet each day. ( bcf/d) in March 2024 compared with 102.9 bcf/d in March 2023.

Dry gas production appears to have peaked at the end of 2023. and has considering that been trending gently but steadily lower.

Inflation-adjusted futures costs collapsed to approximately. $ 1.75 per million British thermal systems in March 2024, the. most affordable for more than three years, slumping from more than $9. in August 2022.

In effect, the number of rigs drilling for gas had. fallen to an average of just 115 in March 2024 from a cyclical. high of 162 in September 2022, according to oilfield services. company Baker Hughes.

The number of active rigs has actually considering that fallen even further to. an average of just 101 in May 2024 as significant manufacturers have. scaled back drilling programmes in response to ultra-low rates.

Unless there is an unanticipated rebound in prices, production. is likely to remain broadly flat throughout the rest of 2024 and. 2025, helping rebalance the market.

Flat or falling output, combined with strong gas combustion. by generators this summer, colder weather next winter, and an. boost in LNG exports, need to remove surplus inventories. before the end of winter 2024/25.

Related columns:

- U.S. gas surplus will be eliminated before end of winter. 2024/25 (May 8, 2024)

- U.S. oil and gas production rebounds after winter season. storm( May 1, 2024)

- U.S. oil and gas output was seriously hit by winter season storm. ( April 3, 2024)

- Record U.S. oil and gas production keeps costs under. pressure( March 1, 2024)

John Kemp is a market expert. The views revealed. are his own. Follow his commentary on X https://twitter.com/JKempEnergy.