November 29, 2017
Rystad Energy’s comprehensive well data for the United States shows that domestic oil production could pass 9.9 million barrels per day in December 2017. For comparison, the EIA estimates oil production will reach just 9.72 million barrels per day in its September Short-Term Energy Outlook (STEO).
Some market participants and industry experts argue that even the EIA’s projection is overly optimistic. Harold Hamm, Chairman of Continental Resources, says the EIA is seriously overstating growth in United States’ shale production and claims this hurts shale drillers’ shareholder value.
“Largely due to Hurricane Harvey and seasonal maintenance in Alaska, production data for August gave the misleading impression that the United States’ shale production was incapable of sustainable growth. In reality, the gap between full production capacity and actual output exceeded 300 thousand barrels per day, which is unprecedented in recent years,” says Artem Abramov, head of well research at Rystad Energy.
Tomorrow, November 30, the EIA will publish a new EIA-914 survey and petroleum supply monthly report (PSM) with the actual oil production for September 2017. The preliminary estimate by the EIA is 9.34 million barrels per day. Any significant adjustment to this estimate will be the first indication of who is right on where U.S. oil production is heading towards year-end. Strong United States oil output in early 2018 would require more concessions by OPEC to protect oil markets from a new dip.
“Since mid-October United States crude stocks have been flattish. The lack of draws can only be explained if United States production is higher than the EIA’s weekly production numbers suggest,” Nadia Martin, vice president of markets at Rystad Energy.
Rystad Energy foresees outstanding net oil additions in the United States in the near future which will likely bring total production capacity to 9.9 million barrels per day by the end of 2017, significantly more than the EIA’s current projections. In turn, we see the EIA’s latest projections as realistic only if adverse winter effects cause well shut-ins in several major states. Based on our aggregated analysis of company correspondence and official state data disclosures, we conclude that the downside risk to the EIA’s 9.72 million barrels per day figure is nearly non-existent.
“With average capacity additions of 100 thousand barrels a day per month and the resolution of outages, production should swing quite strongly upwards by year-end. We think the EIA will have to lift their year-end estimates by 150 thousand barrels per day as we have already seen very promising production numbers in our data,” says Abramov.
David White, Marketing Manager
Phone: +47 24 00 42 00
Artem Abramov, VP Analysis
Phone: +47 24 00 42 00