…As US Shale Production Set To Hit Record High
Yemisi Izuora
Oil prices edged down on Tuesday after a Russian minister said the nation and OPEC may boost crude output to fight for market share, checking a recent sharp rally driven by tighter global production.
Brent crude oil futures were at $71.08 a barrel down 10 cents, or 0.1 per cent, from their last close. Brent ended down 0.5 per cent on Monday.
US West Texas Intermediate (WTI) crude futures were at $63.39 per barrel, down 2 cents, or 0.1 per cent, from their previous settlement. WTI fell 0.8 per cent on Monday.
Russian Finance Minister Anton Siluanov said over the weekend that Russia and OPEC may decide to boost production to fight for market share with the United States, but this would push oil as low as $40 per barrel.
“There is a growing concern that Russia will not agree on extending production cuts and we could see them officially abandon it in the coming months,” said Edward Moya, senior market analyst, OANDA.
The Organization of the Petroleum Exporting Countries, OPEC, and its allies including Russia, known as OPEC+, will meet in June to decide whether to continue withholding supply. That comes after they previously agreed to crimp output by 1.2 million barrels per day from Jan. 1 for six months.
Losses were checked by tighter supplies from Iran and Venezuela amid signs the United States will further toughen sanctions on those two OPEC producers, and on the threat that renewed fighting could wipe out crude production in Libya.
Meanwhile, the U.S. Energy Information Administration , EIA, said in its monthly drilling productivity report on Monday that the U.S. crude oil output from seven major shale formations is expected to rise by about 80,000 barrels per day (bpd) in May to a record 8.46 million bpd.
The largest change is forecast in the Permian Basin of Texas and New Mexico, where output is expected to climb by 42,000 bpd to a fresh peak of about 4.14 million bpd in May.
In North Dakota’s Bakken region, shale production is estimated to rise by about 11,000 bpd to about 1.39 million bpd, easing from a record 1.41 million bpd hit in January. In the Eagle Ford region, output is expected to edge higher by 7,000 bpd to about 1.43 million bpd, which would be the highest monthly output since January 2016.
Production growth in the Permian and other key shale basins have slowed as oil prices fell in the fourth quarter and several shale companies cut spending in the face of investor pressure to focus on earnings growth instead of increased output.
Prices have since rebounded this year, but drillers are expected to remain cautious. Having slashed spending plans and run out of willing buyers for assets, some U.S. shale producers are turning to workforce cuts as investors step up demands for returns.
However, major oil companies are boosting their presence, particularly in the Permian, the largest U.S. shale oil field.
The U.S. rig count, an early indicator of future output, rose for a second week in a row last week and remains higher than a year ago.