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The slowing U.S. shale boom

Oil production
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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