As some economies reopen after being locked down due to the coronavirus, global oil prices have gradually increased and encouraged US shale oil producers to restore about a third of the 2 million bpd output which was shut in April. However, the production bounceback is expected to be short-lived, oil executives and analysts said.
The analysis is based on the fact that constant drilling is required to maintain and increase shale oil production. However, many producers decided to cut their capital spending and stopped new drilling when the coronavirus pandemic caused a collapse in oil prices. In addition, OPEC+ decided to ease its coordinated supply cuts which are expected to underpin oil price recovery.
Hence, analysts said that US shale oil production would likely to fall again in the autumn, especially when considering that output from shale wells drop more quickly than conventional oil wells. According to them, US oil production will remain below the 2019’s record average of 12.2 million bpd in the next two to three years.
Such production drop is expected to affect not only upstream producers but also midstream players, including pipeline and export terminal operators. Many developers have delayed final investment decisions or even cancelled some midstream projects amid lower shale production forecasts.
