US producers getting more out of wells than expected
The nation’s oil production is set to drop less than expected this year as drillers in West Texas and Oklahoma find ways to pump crude faster, and for less money, Goldman Sachs says.The increased efficiency will also lead to greater profits in the future when prices do increase. It was American innovation that largely caused the supply glut to begin with and OPEC's response to it made the problem worse. This increased efficiency will also make the US less dependent on imported supplies of oil further weakening OPEC.
U.S. crude output should fall by 650,000 barrels a day this year, the investment bank said Monday, revising its previous forecast from a decline of 725,000 barrels a day after two weeks of earnings reports by oil and gas explorers.
It’s not a large adjustment, and it doesn’t change Goldman’s mind that falling domestic crude production will, over the next few months, help lift energy prices by realigning oil supply and demand after a two-year glut.
But it’s a sign U.S. drillers are still pushing back against the sharp natural declines across shale plays in Texas and elsewhere, and that they could get an assist from the recent rally in crude prices.
And the fact that oil prices are rising in the face of resilient shale output and higher-than-expected production out of Iran shows global demand is stronger than many believe, and production is falling off elsewhere, Goldman said.
“Signs the world will need a restart of the shale machine remains a potential positive catalyst for oil (companies) despite the recent rally,” Goldman analysts wrote.
One place crude production is falling is Canada, which has suffered an output loss of 1 million barrels a day as wildfires continue to rage across the country.