NextGen Day

ISTANBUL/ANKARA – According to Rystad Energy research, if oil prices remain at or above $100 per barrel, increased demand and sustained supply tightness could unleash up to 2.2 million barrels per day (bpd) of US oil.

Tight oil output in the US’s primary producing zones, such as the Permian, Eagle Ford, Niobrara, Bakken, and Anadarko, reached roughly 7.7 million bpd in the fourth quarter of last year, according to the agency, albeit it remains below pre-pandemic levels.

Production in these locations is anticipated to surpass the 2019 high of 8.1 million bpd by the second quarter of this year, according to the research issued on Monday, and rise higher if a supercycle materializes.

“If oil prices reach and continue around $100 per barrel in the fourth quarter of 2023, overall output from these core regions will reach 9.9 million bpd, up 2.2 million bpd from the same quarter in 2021,” it stated.

As supply from outside the US remains constrained, high oil prices are pushing operators to increase production.

Concerns about the worldwide impact of coronavirus disease 2019 (Covid-19) are dissipating, and nations are lifting or loosening restrictions, resulting in a jump in oil demand that the existing supply cannot match.

Geopolitical risks are also increasing in major exporting countries, threatening to disrupt trade flows in an already limited market.

Total unconventional output from these main US oil locations – comprising oil, gas, and natural gas liquids (NGL) – has already returned to pre-Covid-19 levels, with roughly 15.6 million barrels of oil equivalent per day (boepd) in the fourth quarter of 2021, according to Rystad.

They also expected that total output will continue to rise, reaching a new peak of almost 16 million boepd by the end of March this year.

“Acute supply chain bottlenecks, a lag between price signals and their influence on output, and winter weather-related disruptions will impede growth,” said Artem Abramov, Rystad Energy’s head of shale research, in the analysis.

Abramov noted that there are forecasts that spot sand costs will grow to a range of $50-$70 per ton, which he described as “unprecedented in the industry’s contemporary history” and will hammer operators’ wallets during the shale oil extraction process.

A price range of $70 to $100 per barrel, according to Rystad Energy, would result in a large rise in output in the fourth quarter of 2022, while a sustained run of $90-$100 per barrel would result in a further increase in already recovering rig activity in the second quarter of 2022.

Production would return to 2021 levels by 2024 under a $40 scenario, according to the government.

Looking beyond 2023, the agency estimates that a $100 West Texas Intermediate (WTI) price would allow the industry to grow at a rate of 960,000 barrels per day (bpd) every year from the fourth quarter of 2021 through the fourth quarter of 2025.

According to Rystad, a world at $70 would still allow for a sustainable growth cycle, but at a rate of approximately 560,000 bpd on average.

According to the agency, there is a noticeable shift taking place currently in the Permian and other basins, with industry mood improving.

“Various supply chain bottlenecks may delay the spike in activity, but they will not be a full show-stopper,” it stated, adding that “the industry has repeatedly proved that all such bottlenecks are handled in time.”

According to the agency, a prolonged $100 environment would allow US onshore oil volumes to expand to 13.5 million bpd over the next four years if production from the lower 48 states is forecast to trend towards 12 million bpd by late-2025.

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