US shale oil producers are scaling back, according to a report in The Wall Street Journal.
Amid a slump in oil prices, some of America’s largest oil companies drilled 28% fewer oil wells in January than they did last June.
The Journal’s report cites data from a new study by Rice University’s Baker Institute of Public Policy, due to be released on Wednesday.
Via The Journal’s Daniel Gilbert:
“The findings echo similar points made by two analyses earlier this week. The US Energy Information Administration found that oil production is increasing at a slower rate in four big producing regions of the US; the agency estimates that US producers pumped about 9.2 million barrels a day in January. The International Energy Agency similarly projected slower growth in US production as a result of lower prices.”
The lead author of the Baker Institute report told Gilbert that because it’s much easier to start and stop producing shale and companies are now more sensitive to price changes.
The report covered new onshore wells in most of the continental US. It also included data from the Baker Hughes’ oil rig counts, which have declined through January.
Still, the Journal’s story notes that the wells that slowed down the most were vertical wells, not higher-volume horizontal wells. It adds that there’s difficulty pinpointing the oil wells that are being hit the most and notes that the amount of new crude drilled in January was down 8.5% from June, less than the decline in drilled wells.
And as we reported last week, data from the Energy Information Administration showed that total US oil production in January was at the highest monthly level since October 1973.
According to a Bloomberg report, the EIA’s latest monthly report projects that US production will increase 7.8% to 9.3 million barrels a day. That’s 10,000 less barrels than its January report.
In trading on Wednesday, West Texas Intermediate crude oil fell back below $US50 per barrel to as low as $US49.15.
On Monday, Citi analysts wrote that oil could fall far below its recent lows to $US20 a barrel.