U.S. oil production forecasts for 2017 and 2018 have been significantly revised upwards due to rising prices and increased production efficiency. The EIA now expects U.S. production to reach 9.53 million barrels per day in December 2017, as opposed to prior forecasts of 8.29 million barrels per day when the Agency released its predictions in March of last year, according to the most recent Short Term Energy Outlook, which the Agency publishes monthly.
While the Agency has been continuously revising U.S. production figures upwards, this is a rather large jump. Most of the production growth is centered in the lower-48, with the Permian being a hotbed of activity.
These predictions are supported by data collected by Reuters’ analysts that indicate most major oil companies are now planning for exceptionally strong production growth through at least 2021. This production growth is necessary just to meet the world’s ever increasing demand for oil given natural decline rates of existing wells.
Even as prices hold near $50 per barrel, Royal Dutch Shell Plc, Exxon Mobil Corp, Chevron Corp., BP Plc, Total SA, Statoil ASA, and Eni SpA plan to grow output by a combined 15 percent in the next five years. This means that these seven companies alone plan to add 3 million barrels a day to production over the next five years.
And, as we will discuss further in the article on CERAWeek, the major shale producers indicated that they were just getting started. Hess, for example, is adding four rigs this year and is jumping back into the Bakken and Chevron’s CEO John Watson stated they were “ramping up”.
And of course, these numbers are reflected in the current rig count which has surged to over 600 this month, more than double the level of June. The Permian is where the action is at. But it is not just limited to Texas. Overall, we see increasing investment. And as long as demand continues to grow, decline rates continue at or better than current pacing, and we do not get any shocks out of OPEC, this trend will likely continue.
By: Ty Chapman
Five Star Metals, Inc.
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