According to different sources and company announcements, U.S. producers – including oil majors – have so far cut production by at least 1.5 mb/d in 2Q20, which is likely to be achieved by shut-ins of higher-cost wells, partial reductions in output of selected wells and the deferral of ‘putting on production’ wells,’’ OPEC said in its Monthly Oil Market Report last week
US oil production PLUNGED in early April as Saudi Arabia and Russia tried to repair the broken OPEC + alliance and begin further cuts to support oil prices that decimated the shale patch American. With new OPEC + agreement, Saudi Arabia cuts oil production and export allocations for June to “stabilize” the market – or perhaps better described, to save its oil revenues and economy defaulters. But the US shale patch reacts to the wellhead economy and cuts US oil production much faster and more deeply than analysts originally thought. The decline in US production has been so rapid that US producers are now one of the biggest contributors to the OPEC + coalition (to which they are not a party) to reduce global oil supply, according to Julian Lee, oil strategist for Bloomberg. Data from the U.S. Energy Information Administration (EIA) shows that U.S. production has declined in the past two months. But weekly estimates from EIA data also suggest that the decline in production in recent weeks has been much more pronounced, Lee said. Analysts expect US shale to cut second quarter production sharply due to weak demand, high inventories and low oil prices, and many expect larger reductions than suggested by the EIA estimates. Latest available weekly data EIA production estimated at 11.6 million bpd for the week ending May 8. But the estimate adjustment, formerly known as unrecorded crude oil, is nearly -1 million bpd, the most negative adjustment factor for crude oil production already. Lee of Bloomberg said this could mean the EIA either overestimates US production by 914,000 bpd for the week until May 8, or underestimates demand, or somewhere in between. If the 914,000 b / d of “unrecognized” crude oil is on the supply side, this suggests that crude oil production in the United States was not 11.6 million b / d during from the week before May 8, but rather, from a million b / d down to around 10.6 million b / d. Analysts and industry leaders are seeing more restrictions in the United States this quarter than the EIA’s weekly estimates suggest. Closures across the United States and Canada combined range between 3.5 million and 4.5 million barrels per day, said Jeremy Goebel, executive vice president, Commercial, at Plains All American Pipeline on the earnings call may’s beginning. Raw US cuts, including liquids, could reach at least 2 million barrels per day in June, with Permian-based producers accounting for 42% of the cuts, according to Rystad Energy analysis from last week. “The actual production reductions are likely to be greater and occur not only because of closures, but also because of a natural decline in existing wells when new wells and boreholes decrease,” said the energy research company. “According to various sources and company announcements, American producers – including the oil majors – have so far reduced production by at least 1.5 mb / d in 2Q20, which should be achieved by closing wells more costly, partial reductions in production from selected wells and postponement of production from wells, “OPEC said in its monthly oil market report last week. Platform count data suggests that drilling activity has stopped. According to data from Baker Hughes, the number of oil rigs declined for the week until May 15 by 34 rigs, bringing the total to just 258 …a loss of 544 rigs Year after year. It is the smallest number of active oil platforms in play since mid-2009. In North Dakota, for example, drilling rigs active as of May 17 numbered only 13– five times less than the 66 platforms operating on the same day a year ago, according to data from the Department of Mineral Resources of North Dakota. Large production cuts and low oil prices mean that some small, indebted American shale producers will not survive this slowdown, but those who survive will get stronger. Accelerated production cuts in the US oil sector in Q2 – voluntary, involuntary, economy-oriented or whatever – would accelerate the rebalancing of the market and help the OPEC + coalition in its mission to “stabilize the market”, in addition other words, to drive up oil prices.