U.S. oil production fell slightly in May and will likely continue falling until early next year, as plunging crude oil prices continue punishing domestic producers, according to a new federal report.
Oil and gas companies pumped 50,000 fewer barrels per day (BPD) between April and May, with major crude producing states like North Dakota reporting declines in onshore output, according to the U.S. Energy Information Administration’s monthly Short-Term Energy Outlook.
The EIA predicts shale drilling will continue slowing due to the global oil collapse. Production is expected to fall through February as drilling becomes increasingly uneconomic in various regions, spurring producers to continue pulling back from marginal plays to instead focus on the sweet spots of the nation’s largest shale plays, the government said.
“The forecast decline in U.S. monthly oil production through early 2016 is the result of low oil prices, which pushed oil companies to reduce their investment in drilling that resulted in the lowest number of rigs drilling for oil in nearly five years,” said EIA administrator Adam Sieminski.
Even with domestic benchmark (West Texas Intermediate, or WTI) oil slated to average about $55 per barrel this year, the core spots of the Bakken, Eagle Ford, Niobrara and Permian basins remain economically viable to support development drilling, the EIA said.
As rigs and wells become more efficient and productive, and the costs to drill and complete wells continue falling, onshore production will grow again in late 2016, according to the EIA.
Despite the slowdown in the U.S. oil patch, producers still are expected to pump more oil in 2015 than they have in 45 years, with output expected to average 9.5 million barrels per day (MMBPD). That’s roughly 40,000 BPD more than EIA projected in June, as the agency revised its estimates upward to take into account more Gulf of Mexico production scheduled to come online in the second half of the year.