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Shocking: U.S. oil production started its fall this January

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Shocking: U.S. oil production started its fall this January

Unread postby Observerbrb » Mon 27 Apr 2015, 07:07:29

According to the latest preliminary data published by EIA, U.S. oil production was already affected by the low oil prices this same January

Image

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Big Hit For U.S. Oil Production In January

U.S. crude oil production fell at least 135,000 barrels of oil per day in January 2015 compared to December 2014 according to the EIA (Figure 1).

Bakken Shale production fell the most of any play or jurisdiction losing 37,000 barrels per day in North Dakota and 4,000 barrels per day in Montana for a total of 41,000 barrels of oil per day (Figure 2). Production in California, the offshore Gulf of Mexico, Alaska and Wyoming also declined significantly.

This is important because DrillingInfo data also shows significant decreases in the Eagle Ford and Permian basin plays in January 2015 of 36,000 and 33,000 barrels of oil per day, respectively (Figures 4 and 5). EIA shows that Texas production increased 3,000 barrels per day.

It is important to emphasize that all of the data presented here is early and subject to revision. In fact, my models do not predict production decreases in the tight oil plays in January based on declining rig counts. The explanation may be that the decreases are seasonal or, more likely, that operators are electing to postpone production because of low oil prices. Falling production shown by EIA in California and Wyoming could represent stripper wells that do not return operating costs at current oil prices.

If these declines prove to be valid, combined decreases from the Bakken, Eagle Ford and Permian plays amount to 111,000 barrels per day.

In any case, it is interesting that the EIA showcases all increases in U.S. oil and gas production but is silent about the production decreases that its own data shows.

http://oilprice.com/Energy/Crude-Oil/Bi ... nuary.html

Original data:

http://www.eia.gov/dnav/pet/pet_crd_crp ... blpd_m.htm
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Re: Shocking: U.S. oil production started its fall this Janu

Unread postby vtsnowedin » Mon 27 Apr 2015, 09:39:07

I don't see anything shocking about this. It is the expected response to a decrease in price, just basic economics 101. The worry is some companies will be driven under by prices lower then their cost and they won't be able to restart up after prices return to the $100 plus range. When we get a reduction in supply in the face of a price increase on the other hand it will be alarming if not unexpected.
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Re: Shocking: U.S. oil production started its fall this Janu

Unread postby ROCKMAN » Mon 27 Apr 2015, 19:04:47

"This is important because DrillingInfo data also shows significant decreases in the Eagle Ford and Permian basin plays in January 2015 of 36,000 and 33,000 barrels of oil per day, respectively (Figures 4 and 5). EIA shows that Texas production increased 3,000 barrels per day." Folks need to remember the lag time between a well being drilled and when it begins producing. Even if a company didn't voluntarily delay frac'ng (which the data now shows hasn't happened nearly as often as some speculated) it can take 6+ months after the rig moves off before production begins. Much of the January production is from wells drilled before the rig count began falling off the cliff.
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Re: Shocking: U.S. oil production started its fall this Janu

Unread postby Observerbrb » Tue 28 Apr 2015, 19:51:04

vtsnowedin wrote:I don't see anything shocking about this. .


You'll might be shocked if you learnt that the EIA was adamantly denying that the US oil production declined in January just a week ago... Why are they acting in this way?
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Re: Shocking: U.S. oil production started its fall this Janu

Unread postby vtsnowedin » Wed 29 Apr 2015, 08:59:46

Observerbrb wrote:
vtsnowedin wrote:I don't see anything shocking about this. .


You'll might be shocked if you learnt that the EIA was adamantly denying that the US oil production declined in January just a week ago... Why are they acting in this way?

The EIA is a government bureaucracy and an arm of the Obama administration. Lying to the public to make the situation look better is considered a permissible activity. "You can keep your insurance plan and your doctor".
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Re: Shocking: U.S. oil production started its fall this Janu

Unread postby copious.abundance » Wed 29 Apr 2015, 22:01:42

Observerbrb wrote:[...]

Original data:

http://www.eia.gov/dnav/pet/pet_crd_crp ... blpd_m.htm

Huh? That's barely a blip at all. And in fact February set a new post-1973 record.

Oct: 9,063
Nov: 9,029
Dec: 9,228
Jan: 9,214
Feb: 9,238

Notice on the chart there are a zillion similar blips, including some recent ones (for example, April-May 2012).

Sloppy journalism!
Stuff for doomers to contemplate:
http://peakoil.com/forums/post1190117.html#p1190117
http://peakoil.com/forums/post1193930.html#p1193930
http://peakoil.com/forums/post1206767.html#p1206767
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Re: Shocking: U.S. oil production started its fall this Janu

Unread postby ROCKMAN » Wed 29 Apr 2015, 23:13:20

c-a: "That's barely a blip at all. And in fact February set a new post-1973 record." So true. A lot of folks have trouble understanding the time factor at play. Maybe it's due to becoming use to the 24-hour news cycle and instant communication on the Internet. As been pointed out many times it can take 6+ months between the time a rig moves off and a well begins producing. And then add a month or two for the lag in data being publicly available. The Feb production you posted was from wells drilled in Sept 2014 or so...and even earlier in some cases. A lot of folks also don't recall the rig count for oil wells didn't start to fall until late Dec 2014 when it dropped below 1500 for the first time in quite a while.

So given the lag time we shouldn't see the INITIAL effects of the rig count drop on production until this summer and the full impact until next Oct or Nov. Folks just need to be patient....the drop off in production is coming. And they also need to understand that even when the rig count stabilizes the production drop off won't. As you point out we're still hitting new highs. But those highs are based on wells drilled late last year. But fracture production being what it is that surge from the new wells will decline 40%+ in 12 months or so. Which means that even if the rig count stays at the current level we'll start seeing the effect of that high decline rate just begin this summer and not reach its peak until late 2015.

So the good news: the recent plunge in rig count won't have a significant impact on US oil production until late 2015/early 2016. The bad news: the time lag works the same way on the backside: IF oil prices increase significantly by the end of 2015 and IF the rig count starts to increase significantly it won't show up on the production side until late 2016 AT THE VERY EARLIEST. And IMHO there's little expectation for drilling to turn around that quickly so it will be 2017 before we can expect the slide in US oil production to level out let alone begin to increase again. And even that depends on a significant increase in activity to start by early 2016. And I don't see many making that bet at the moment given the rig count is still slowly falling.
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Re: Shocking: U.S. oil production started its fall this Janu

Unread postby copious.abundance » Wed 29 Apr 2015, 23:24:59

The worst thing about the article was the title: "Big Hit For U.S. Oil Production In January"

I mean - c'mon! It declined a whopping 14K bpd in January. Hardly what I would call a "big hit!"
Stuff for doomers to contemplate:
http://peakoil.com/forums/post1190117.html#p1190117
http://peakoil.com/forums/post1193930.html#p1193930
http://peakoil.com/forums/post1206767.html#p1206767
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Re: Shocking: U.S. oil production started its fall this Janu

Unread postby ROCKMAN » Thu 30 Apr 2015, 03:44:12

c-a: Yes, it's really foolish and indicates either no understanding of the dynamics I just described or they are just chumming for publicity. The significant drop in the growth of US oil production is guaranteed by the fall in rig count alone. That understanding requires no knowledge of geology, frac'ng or any other tech aspect: it's simple math: production boomed with 1600 rigs and won't boom with 700.
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Re: Shocking: U.S. oil production started its fall this Janu

Unread postby rdberg1957 » Tue 05 May 2015, 17:21:09

Thank you Rockman for the helpful explanation. US production is unlikely to rise again unless the price rises substantially. Recently gas prices and crude oil have risen some, but $60/barrel is not $90-$100/barrel.
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Re: Shocking: U.S. oil production started its fall this Janu

Unread postby ROCKMAN » Wed 06 May 2015, 14:51:20

rdberg - And folks need to look back at the time lag between rising oil prices and the boom time production rate we just reached. Even if oil prices eventually increase to some significant level it would take years to recover from the slide backwards we haven't started to see yet. And that will have to come from a heavily indebted oil patch and an investor/banker pool many of whom are in the process of being skinned alive. And lets not forget that however many wells that were to be drilled many thousands have already been drilled so that pool of opportunities has also decreased significantly...and their contributions continue to decline daily.
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Re: Shocking: U.S. oil production started its fall this Janu

Unread postby Observerbrb » Sun 10 May 2015, 14:06:37

ROCKMAN wrote:c-a: Yes, it's really foolish and indicates either no understanding of the dynamics I just described or they are just chumming for publicity. The significant drop in the growth of US oil production is guaranteed by the fall in rig count alone. That understanding requires no knowledge of geology, frac'ng or any other tech aspect: it's simple math: production boomed with 1600 rigs and won't boom with 700.


Thanks for your explanation, ROCKMAN.

It would be pretty much clear that the US oil production has declined in September-October-November, my question is... Would you be willing to make an estimation (conservative assessment) of the drop in production?
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Re: Shocking: U.S. oil production started its fall this Janu

Unread postby ROCKMAN » Sun 10 May 2015, 19:39:20

Observer - "It would be pretty much clear that the US oil production has declined in September-October-November". Actually that shouldn't be the case. Again remember the time lag: wells that started producing during 4Q 2014 had finished drilling (and thus representing high rig counts) last summer. Last numbers I saw we had still increased a tad in January. Remember: on the order of 6 months from when a well is finished drilling (and the rig moves off) and when that well's production is reported publicly. We still had a high rig count by early last December.

The fall off in the US oil production increases should just start to becoming evident. Bt I don't ex[pect the full effect of the rig count drop in the production numbers until 3Q/4Q.
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Re: Shocking: U.S. oil production started its fall this Janu

Unread postby copious.abundance » Thu 14 May 2015, 00:24:34

Abundance aplenty. :)

Shale-oil producers ready to raise production
After slashing production for months, U.S. shale-oil companies say they are ready to bring rigs back into service, setting up the first big test of their ability to quickly react to rising crude prices.

Last week, EOG Resources Inc. said it would ramp up output if U.S. prices hold at recent levels, while Occidental Petroleum Corp. boosted planned production for the year. Other drillers said they would open the taps if U.S. benchmark West Texas Intermediate reaches $70 a barrel. WTI settled at $60.50 Wednesday, while global benchmark Brent settled at $66.81.

An increase in U.S. production, coupled with rising output by suppliers such as Russia and Brazil, could put a cap on the 40% rally in crude prices since March and even push them lower later in the year, some analysts say.
Stuff for doomers to contemplate:
http://peakoil.com/forums/post1190117.html#p1190117
http://peakoil.com/forums/post1193930.html#p1193930
http://peakoil.com/forums/post1206767.html#p1206767
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Re: Shocking: U.S. oil production started its fall this Janu

Unread postby ROCKMAN » Thu 14 May 2015, 08:12:39

"...EOG Resources Inc. said it would ramp up output if U.S. prices hold". Unfortunately EOG (the premier shale developer IMHO) isn't typical of the average shale player out there. I don't know what price the others require but I doubt many can kick things back off at a lower price that EOG can. IOW there were more than a few shale players that were grabbing the brass ring when oil was going for $80/bbl.
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Re: Shocking: U.S. oil production started its fall this Janu

Unread postby Observerbrb » Thu 21 May 2015, 10:35:35

http://www.bloomberg.com/news/articles/ ... ng-in-june

Oil production decline in May: 55,000 bpd
Oil production decline in June: 86,000 bdp

It seems to me that the Oil decline started this May and its gaining traction, as Rockman forecast.
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Re: Shocking: U.S. oil production started its fall this Janu

Unread postby ROCKMAN » Thu 21 May 2015, 12:23:23

I still expect it to be late in 2015/early 2016 before we see the full impact of the rig decline. Even if prices jump this summer and a lot of rigs return it will be on the order of 6 months before those new bbls show up in the production totals. IOW a summer 2015 "drilling boom" would 't increase production until Jan 2016,,,at the earliest.
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Re: Shocking: U.S. oil production started its fall this Janu

Unread postby copious.abundance » Thu 28 May 2015, 13:55:28

Observerbrb wrote:http://www.bloomberg.com/news/articles/2015-05-11/america-s-shale-oil-production-decline-seen-accelerating-in-june

Oil production decline in May: 55,000 bpd
Oil production decline in June: 86,000 bdp

It seems to me that the Oil decline started this May and its gaining traction, as Rockman forecast.

OOPS!
Stuff for doomers to contemplate:
http://peakoil.com/forums/post1190117.html#p1190117
http://peakoil.com/forums/post1193930.html#p1193930
http://peakoil.com/forums/post1206767.html#p1206767
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Re: Shocking: U.S. oil production started its fall this Janu

Unread postby Observerbrb » Thu 28 May 2015, 17:57:13

They are trying to compensate financial losses by producing more volume.

Let's see what happens during the next months, but if Rockman is right we should see a significant decline in the coming months...

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