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US oil production

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According to todays montly statistics US oil production from end of 2019

October 2019 12673

November 2019 12860

December 2019 12802

January 12755

February 12746

March 12737

Aprill  11990

May 10001

My comment

As can be seen, the growth of production of shale oil in the USA stopped even before the start of the coronavirus pandemic.

This is due to the fact that the price of $ 60 per barrel roughly corresponds to the real full cost of shale oil production in America's largest oil fields.

The boom in the shares of the shale oil producers sector is also over.

This is due to the fact that when oil prices fell below $ 30 in 2016, the future movement of prices was obviously going up.

Those who invested in the sector and sold their shares in a timely manner often earned over 200% of the original share contribution so that was in contrast to the dominant narrative that it is the worst performing sector on the stock exchange very good investment from 2016 to 2018/2019.

However, when the oil price stabilized at a level more or less equivalent to the real full break-even costs and there were no prospects for significantly higher oil prices in the coming years, the attractiveness of shale stocks declined and one of the main sources of financing for new investments dry up, which is associated with a gradual decline in drilling activity from last year, which is clearly visible in the simplest rig count pointer.

In the era of the coronavirus, many companies will go bankrupt.

I think that in such a difficult market situation there will be few entities ready to take over the bankrupting competition.

Due to the fact that this sector is of great importance for the US, the only solution is to gradually nationalize some entities.

This is not the end of the US shale sector, which will produce oil and gas in large quantities over the next decades, but in my opinion the end of the narrative of US domination in the oil and gas sector as a major global exporter of oil and gas. In my opinion, America should probably export gas if its profitable  that requires quite high LNG prices of the raw material around the world, but when it comes to crude oil, looking at total oil resources in the USA and the current needs, crude oil exports in the perspective of more than a decade always seemed to me as short-term perspective move.

As for the future oil production, it seems inevitable in the near future, given how drilling activity has declined, a decline in production at least until the end of 2021. At the same time, in the near future after the opening of shut-in fields in the third quarter, the production of shale oil should temporarly rebound for several months, but in the longer term, the fact that currently less than 200 drilling rigs are in operation in the USA and about 600 are needed to maintain production, the direction of production is clear. The EIA is less radical, but Art Berman is already predicting a drop to 8 million barrels in the middle of next year.


Edited by Tomasz

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One thing I have learned from reading Art Bermans stuff, he is either dead wrong, or does nothing but repeat what is already known that anyone can figure out with a week of reading.  True, he is VERY knowledgeable, in fact far more knowledgeable than I, or at least talks much better than I, but I have NEVER seen one of his predictions come true.  NEVER.  Unless he is talking a mere ~month or two out and then only in broad strokes.

Will shale continue to decline?  Yes, but it will rebound back for the VERY simple reason that the oil will be required due in no part due to sunk costs.  Also true, worker costs and royalties etc will be slashed again, but it will come back.   

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