It’s had a great run.
But US oil production is on the verge of an inflection point, according to Alliance Bernstein’s Bob Brackett.
In a new note, he observes that while total production may still be rising, the rate of growth is decelerating. And barring an unexpected surge at the end of the year, 2013 will have seen lower a lower production rate than 2012.
This does not mean the shale revolution is over.
Rather, he says, the whole shale complex has now matured.
We continue to believe that the rate of year-on-year production growth will slow. We believe that slowing (or as we term it, the inflection point at which the market realises that production growth rates will be lower than the previous year) is a 2013 event. Exhibit 5 shows our logic. It plots US oil production by week in green and then shows the year-on-year growth.
The red shaded area corresponds to the growth that would be required to avoid inflection. It implies that the remainder of the year would need nearly 800 KBOPD of growth (with the first 63% of the year achieving only ~500 KBOPD). Given flattish rig counts and modestly rising efficiencies, we don’t believe such back-loaded growth will be possible.
Here’s his chart, with our annotations:
All this is further evidence, he says, that shale oil production will not lead to a global price collapse, and that WTI-traded crude will have hit at least $US100 by 2015.