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Output from the prolific tight-rock formations such as North Dakota’s Bakken shale will decline 57,000 barrels a day in May, the Energy Information Administration said Monday. It’s the first time the agency has forecast a drop in output since it began issuing a monthly drilling productivity report in 2013.
Deutsch Bank AG, Goldman Sachs Group Inc. and IHS Inc. have projected that U.S. oil production growth will end, at least temporarily, with futures near a six-year low. The plunge in prices has already forced half the country’s drilling rigs offline and wiped out thousands of jobs. The retreat in America’s oil boom is necessary to correct a supply glut and rebalance global oil markets, according to Goldman.
“We’re going off an inevitable cliff” because of the shrinking rig counts, Carl Larry, head of oil and gas for Frost & Sullivan LP, said by phone from Houston on Monday. “The question is how fast is the decline going to go. If it’s fast, if it’s steep, there could be a big jump in the market.”
“U.S. production can return quickly with any price recovery,” Adam Longson, an analyst at Morgan Stanley in New York, said in an April 13 research note. “A backlog of uncompleted wells, falling service costs, hedging opportunities and plenty of capital on the sidelines should all support investment, perhaps more than the market expects.”
The EIA’s May production forecasts cover the yield from major plays that together accounted for 90 percent of domestic output growth from 2011 to 2012.
Output from the Eagle Ford in Texas, the second-largest oil field in the U.S., is expected to fall 33,000 barrels a day in May to 1.69 million. Production in the Bakken region of North Dakota will decline 23,000 to 1.3 million, the EIA said.
Yield from the Permian Basin in West Texas and New Mexico, the largest U.S. oil field, will continue to rise, by 11,000 barrels a day to 1.99 million.
The EIA’s oil-production estimates are based on the number of rigs drilling in each play and estimates on how productive they are. The numbers of oil rigs in service across the country slid 42 last week to 760, the fewest since December 2010, Houston-based field services company Baker Hughes Inc. said.
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