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US oil and gas production program indications of flattening: Kemp

U.S. oil and gas production are finally revealing signs of flattening out as drilling rigs and well completion crews have actually been idled in response to the retreat in prices because the middle of 2022.

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

However, there had actually been no net development because October 2023, indicating the rise in production after completion of the coronavirus pandemic and Russia's invasion of Ukraine had ended.

Production from the Lower 48 states leaving out 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 earlier.

Growth had slowed from 0.9 million or 1.0 million b/d in the second half of 2023 as the incentive from the previous high rates 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 considering that the start of the century) from a high of $124. in June 2022 (83rd percentile).

Production began to stabilise or pull back about 10-12. months later, in line with the historical relationship between. cost and output modifications.

Clear proof that U.S. oil production was turning over was. masked by unusual weather condition in December 2023 and January 2024. misshaping year on year contrasts.

But with the return of more typical weather in March 2024 the. lack of net growth over the last 6 months has become apparent.

OIL STABILISATION?

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

At these prices, there is no strong signal to increase or. decline production.

The number of rigs drilling for oil was up to approximately. just 497 in May 2024 from a cyclical peak of 623 in December. 2022.

If futures costs stay around present levels, U.S. production is most likely to remain generally flat for the rest of. 2024 through a minimum of the middle of 2025.

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

U.S. GAS PRODUCTION

The decline in gas costs given that the middle of 2022 has actually been. a lot more serious and has actually brought all development in production to a. stop.

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

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

Inflation-adjusted futures prices collapsed to an average of. $ 1.75 per million British thermal units in March 2024, the. least expensive for more than 3 decades, plunging from more than $9. in August 2022.

In repercussion, the variety of rigs drilling for gas had. been up to approximately just 115 in March 2024 from a cyclical. high of 162 in September 2022, according to oilfield services. business Baker Hughes.

The variety of active rigs has because fallen even further to. approximately just 101 in May 2024 as major manufacturers have. scaled back drilling programs in response to ultra-low prices.

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 marketplace.

Flat or falling output, integrated with strong gas combustion. by generators this summer season, chillier weather condition next winter, and an. increase in LNG exports, ought to get rid of surplus inventories. before completion of winter season 2024/25.

Related columns:

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

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

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

- Record U.S. oil and gas production keeps prices 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.