In its weekly report on U.S. crude oil production, the Energy Information Administration noted a weekly decline in domestic crude production of 600,000 barrels a day week over week and a 1.7 million barrel a day reduction compared to production in the same week last year.
Not everyone believes that the production decline will continue. In fact, as crude prices approach $40 a barrel for West Texas Intermediate (WTI) crude oil, some U.S. shale producers are beginning to turn the taps back on.
Industry analysis firm Primary Vision wrote this in a blog post last week: “Companies have started talking about bringing shut-ins back online in June, and between the Permian, Bakken, and EF [Eagle Ford shale plays] there is about 500k barrels (some have already started- 100k in the [B]akken for example) will come back on through June.”
Half a million barrels a day would drive weekly production back to around 11 million barrels a day from last week’s EIA-reported production of 10.5 million barrels a day. And as production increases, prices come under pressure. As prices drop, producers look for more storage to hold their crude until prices rise again.
Coupled with falling prices is a drop in U.S. exports. Crude exports dropped by 265,000 barrels a day last week to 4.35 million barrels. Year over year, the decline in exports totaled nearly 1.1 million daily barrels last week.
Devon Energy Corp. (NYSE: DEV) CEO David Hager told Tuesday’s attendees at the J.P. Morgan energy conference that if prices remain above $30 a barrel, he does not expect “any significant curtailments” to production in the third-quarter “or beyond.” Hager said that Devon is in the process of bringing 8,000 barrels a day back into production.
The North Dakota Department of Mineral Resources noted last week that about 60,000 barrels a day had come back by mid-May while 450,000 barrels remain shut-in or choked back in the Bakken.
ConocoPhillips (NYSE: COP) CEO Ryan Lance has said that his company will restore 100,000 barrels of shut-in Alaska production by July according to a report at Reuters.
U.S. producers were able to cut production by more than 2 million barrels a day by slowing down the flow (choking) from shale wells. Lloyd Helms, COO at EOG Resources Inc. (NYSE: EOG) said the company was able to shut-in “thousands” of wells in a short time and with minimal effort. “And we can bring those back on with really minimal time and effort, too,” he pointed out.
WTI crude traded down about 0.5% at $38.18 a barrel just ahead of the close of live trading Wednesday. Brent crude, the international benchmark, traded at $40.76 a barrel.