Has U.S. shale oil production stalled? Well, it seems so. After experiencing significant growth in 2017 and 2018, U.S. shale production in the first five months of this year has remained flat. This is terrible news for the shale industry which has counted on production growth to increase cash flows so it can pay down debt.
And, along with not being able to increase production in the first five months of the year, the shale industry continues to receive an onslaught of negative press as recent articles reveal the disaster beginning to take shape. For example, here are a few articles indicating BIG TROUBLE ahead for the U.S. Shale Oil Industry:
These articles are only from the past month. If I would go back and search for six months, I could fill the entire page with negative articles.
While it’s true that the U.S. shale oil industry has increased production by nearly 7 million barrels per day over the past decade, it has come at a terrific cost. I have to say, I underestimated the degree at which the shale industry could ramp up production. However, I have not underestimated the disaster that is coming when the U.S. shale oil industry finally disintegrates. It will have a tremendous impact on the U.S. and global economy.
According to the data published (by Enno Peters) at ShaleProfile.com, U.S. shale oil production has remained virtually flat since December 2018:
The prices in the chart represent the average annual WTIC oil price for each year. WTIC oil refers to the U.S. oil benchmark called West Texas Intermediate Crude price. Even though the WTIC oil price in 2019 is lower versus 2018, it is higher than in 2017 when production surged by more than 1.3 million barrels per day from Jan-Dec 2017. So, after two years of significant shale oil production growth, 2019 has turned out to be a real DUD.
Moreover, if we look at the U.S. shale oil production increase from Dec-May for the past three years, we can see plainly see how hard the BRAKES came on this year:
Again, according to the detailed well data from ShaleProfile.com, which I highly recommend checking out, the increase of U.S. shale oil production of 453,000 barrels per day (bd) Dec-May 2017, and then 526,000 bd during Dec-May 2018 was quite substantial compared to the decline of 30,000 bd Dec-May 2019.
The plateau in shale oil production seems to be a result of some majors, such as ExxonMobil increasing production while other smaller players are remaining flat or declining. But, there is no doubt that U.S. shale production in the first five months of 2019 is a much different trend than what took place over the past two years during the same period.
So, what does this all mean?? If oil prices continue to remain in the low $50s or even fall into the $40s as recessionary economic forces increase, we could see the optimistic shale oil production forecasts GUTTED even more in 2019 and 2020. Which, we are already experiencing even with oil prices in the mid to high $50s.
Unfortunately, Americans aren’t prepared for what’s coming. Why? Because, there still seems to be a lot of HOPIUM in the Mainstream press that the United States will become energy independent and lead the world as the largest oil producer. If we look at the following chart of total U.S. oil production since 1920, we can spot the TRENDS:
U.S. oil production from 1930 to 1970 went up in the same trend as it came down from 1980 to 2010 (approximately). Not only has U.S. oil production jumped by 7 million barrels per day IN ONE DECADE (2009-2019) versus 7.5 million barrels per day IN FOUR DECADES (1930-1970), the inevitable decline will likely mirror the same trend, shown by the RED ARROW. Thus, the wildly optimistic forecasts of U.S. shale oil production to peak in 2025-2030 and then slowly decline over the next two decades… ARE PURE RUBBISH.
Lastly, the U.S. oil and gas industry has $137 billion worth of debt due by 2022. While this wasn’t a problem before for shale companies as they were able to use PONZI FINANCE to issue new debt to pay existing debt, it doesn’t seem as if they have this GET OUT OF JAIL free card the next time around. So, the pied piper is likely to come asking for the return of investors’ funds. But, will these shale companies be able to pay back this $137 billion in debt? Or how many will be able to roll it over?? These are all excellent questions which I plan to watch and write about over the next two years.
Make sure you stay tuned and bring your POPCORN.
IMPORTANT NOTE: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.
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