After 2018’s record-breaking boom when US oil output in 2018 hit new highs around 11.7 million barrels a day, there are forecast growth will be slow this year.
The US government’s Energy Information Administration sees US daily production growth slowing to around 500,000 barrels a day from December 2018 and December 2019.
That will be a sharp slowing in growth from the 1.8 million barrels a day in the 12 months to December 2018.
With global demand expected to slow this year as the EU economies tip towards recession, China slows (but still imports oil at record levels) and the US economy fades, the slowdown in US production might not be a bad thing.
Slowing output growth might help keep world stocks from rising too quickly in the coming months.
The problems in Venezuela though look the big danger to market stability – it is currently producing around a million barrels a day but that could fall further if US sanctions hit hard.
US benchmark West Texas Intermedia (WTI) crude futures dropped from a peak of about $US76 a barrel in early October to about $US42 on Christmas Eve, before recovering to about $US53 a barrel this week.
On Friday, WTI crude for March delivery rose 1.1%, to settle at $US53.69 a barrel in New York Mercantile Exchange. The contract lost 0.7% for the week.
In Europe, March Brent crude rose 0.9%, to $US61.64, but still lost about 1.7% over the week.
Meanwhile, figures from Baker Hughes on Friday showed that the number of active rigs drilling for oil in the US, rose by 10 to 862 last week.
That was the first weekly rise in the last four and followed a drop of 21 in the oil-rig count a week earlier (and 25 in total including a fall in the number of gas only rigs).
The number of oil rigs in the US looking for oil has dropped by more than 7% since last November and according to the Financial Times, this is being driven by a slowing in exploration activity and by cash constraints.
Capital raising by US oil exploration and production companies has fallen sharply since crude prices started falling last October.
US analysts point to cutbacks in capital spending and a continuing slowdown in activity.
Companies in the sector have not held a single bond sale since the start of November, according to the financial data group, Dealogic, while share sales have also slowed.
As crude prices started to slide last October, that source of capital was choked off, with just three bond sales by exploration companies that month, and none at all since November, according to Dealogic.
Weak share prices have also been a deterrent to capital raising. Share issuance by exploration and production companies has slowed sharply, with just $US157 million raised from equity sales in the past four months as the S&P oil and gas exploration and production sector index has fallen 28% since October.
The FT says “There has not been an initial public offering of an oil and gas company for more than a year, and companies that were looking at possible flotations are expected to wait for markets to recover.”
But first, the industry has to get through the impact of the latest slide in price and the squeeze on producers in the fracking sector.
The outlook for the US oil industry remains bullish – even if output growth is forecast to slow this year.
The EIA’s annual energy outlook report still sees US crude oil production continues to set annual records through the mid-2020s and will remain above 14.0 million barrels per day through 2040.
The report also saw the US becoming a net energy exporter by 2020 as crude production increases and domestic consumption slows.
