EIA revises forecast to steeper crude production drop

This week is bringing new snapshots of how hard the pandemic hit the U.S. oil patch earlier this year and the difficult path ahead, even as demand is now haltingly returning and prices have recovered somewhat.

Driving the news: The U.S. Energy Information Administration yesterday offered its latest downward revision of its domestic crude oil production forecast.

• The agency cut its 2020 average by 370,000 barrels to 11.26 million barrels per day, a far cry from pre-pandemic analyses, graphed out above.
• The most recent in a string of downward revisions comes largely because May's output collapse was steeper than initially thought, "indicating more extensive production curtailments than previously estimated."

Threat level: Nine more North American oil-and-gas producers and seven more oilfield services companies filed for Chapter 11 bankruptcy protection in July, per new reports from the law firm Haynes and Boone.

• "It is reasonable to expect that a substantial number of producers will continue to seek protection from creditors in bankruptcy even if oil prices recover over the next few months," the firm said.

What's next: A return to new drilling, but activity will remain at low levels for a while. "Unless WTI oil prices move towards $50 per barrel in the next few weeks, a rig activity rebound is unlikely before the first half of 2021,” Rystad Energy analyst Artem Abramov said in a note this week.

The big picture: Bloomberg points out that companies are figuring out ways to cut well costs even further, but that creates its own dilemmas.

• "U.S. shale producers are at a crossroads as they find themselves more efficient than ever. They can keep drilling, and potentially dent oil prices, or use the money to pay down debt," it reports.