The slowing U.S. shale boom
U.S. oil production growth is slowing down — and soon, the industry may slam on the brakes, according to a new analysis and a top industry executive.
Why it matters: It's the latest sign that producers — facing modest prices and investor demands for returns — are repositioning after the boom that has made the U.S. the world's largest oil producer.
- It's a contrast to 2018 when U.S. production surged by nearly 2 million barrels per day.
- The slowdown could also bring new challenges for local economies in Texas and elsewhere that are tethered to the industry.
Driving the news: The consultancy IHS Markit sees U.S. oil production growth "essentially flattening out" in 2021 after slowing to 440,000 barrels per day in 2020.
- Meanwhile the CEO of Pioneer Natural Resources — a big shale producer — told analysts yesterday that the surging Permian Basin will "slow down significantly over the next several years."
What they found: IHS said producers are responding to lower prices that stem from trade wars and weaker than expected demand.They see prices for the U.S. benchmark West Texas Intermediate averaging around $50-per-barrel in 2020 and 2021.
What's next: The consultancy expects "modest growth" to resume in 2022 after flattening in 2021, but not a return to the surge of recent years.
The bottom line: "[T]his is a new era of moderation for shale producers," IHS analyst Raoul LeBlanc said in a statement.“Investors are imposing capital discipline...by pushing down equity prices and pushing up the cost of capital on debt markets," LeBlanc said.
Go deeper: Texas dominates U.S. oil production