Oil output from US shale fields will continue to decline in August, despite several shale bosses noting that they plan on re-opening a number of wells that were closed down to reign in supply amid the COVID-induced crude crash. However, prices still remain too low to generate any kind of meaningful margins on these debt-heavy drillers. While some of their supply is protected by previously hedged prices, the time on those contracts is running out and bankruptcies loom. The feasibility of expansion and recovery of US shale remains a big question mark as some project the American oil industry is already past peak production.
Related ETFs: United States Oil Fund, LP (USO), Energy Select Sector SPDR Fund (XLE)
American shale output continues to fall this summer.
Per the latest edition of the EIA’s Drilling Productivity Report, US crude output in these prolific shale plays is expected to decrease to 7.49 million b/d in August, down 56,000 bpd from July, a level last seen in 2018.
Only 223 horizontal rigs — a proxy for US shale drilling activity — were operating on July 9, according to data provider Enverus, compared with 853 a year ago.
The weekly oil-directed rig count in June reported by Baker Hughes averaged just 196 – down from the 2019 average of 774. In other words, when compared to 2019, the U.S. oil rig count has collapsed 75% while overall production has fallen 12%.
As World Oil writes, the reopening of a number of wells by operators including Continental Resources Inc., EOG Resources Inc., and Parsley Energy Inc. may do little to bring new growth to an industry being increasingly starved of cash…