BAKU, Azerbaijan, June 14
By Leman Zeynalova – Trend:
US crude oil production remains on track to resume growth in 4Q 2021, Trend reports with reference to the US JP Morgan Bank.
“We assume— conservatively in our estimation—that US producers will hold well completion activity relatively flat from current levels through the end of our forecast. Active frac fleet data from Rystad show that producers are indeed holding frac counts (and low rig-to-frac ratios) in the Permian Basin steady. Moreover, the data also show that they are actually increasing well completion activity beyond our expectations in the Eagle Ford and the Rockies. In spite of this increase in activity, we are not revising our production outlook this update. Recent frac count numbers are preliminary and subject to revision which makes us cautious on incorporating these higher activity levels into our production model just yet. We are mindful, however, that the increase in frac activity we see in early May data shifts the risk to our production outlook to the upside,” said the Bank.
JP Morgan Bank said it is becoming clear that, in order to keep their promises not to grow output, publicly-traded US producers need to cut frac activity levels immediately.
“If operators in the Permian and the Eagle Ford dropped 30 active fracs on 1 July, raising the rig-to-frac ratio to keep drilled, uncompleted (DUC) well inventories flat, US crude oil production would still end 2021 up 240 kbd vs December 2020. With prompt WTI prices at $70/bbl, we think this scenario is highly unlikely. Under our WTI price outlook, we expect WTI to remain above $70 for the balance of 2021, it is much more likely that, as DUC inventories fall toward operational minimums, US operators either add drilling rigs to match the pace of completions or raise rigs and cut fracs simultaneously to slow drawdowns in DUCs.
We think that, considering the price environment, operators are unlikely to cut fracs at all, but, in either case, the shift will happen too slowly to significantly slow the production growth we expect in 4Q 2021. There is a chance we could be overestimating end of year output if, in an effort to keep production growth at levels their investors demand, operators hold off on turning some 4Q wells to sales. Though, even in that scenario, the wells would come online in 1Q 2022 and the trend in production growth would remain the same,” said the JP Morgan Bank.
The United States became the world’s top crude oil producer in 2018 and maintained the lead position in 2019 and 2020. U.S. oil refineries obtain crude oil produced in the United States and in other countries. Different types of companies supply crude oil to the world market. Crude oil is produced in 32 U.S. states and in U.S. coastal waters. In 2020, about 71 percent of total U.S. crude oil production came from five states.
In 2020, about 14.6 percent of U.S. crude oil was produced from wells located offshore in the federally administered waters of the Gulf of Mexico.
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