In a research note sent to Rigzone by the JPM Commodities Research team recently, analysts at J.P. Morgan said the greatest threat to the U.S. shale sector remains low prices.
“At WTI price of $60, U.S. oil production will likely stagnate, while at $50, it will outright decline under the current cost structure,” the analysts warned in the note.
The J.P. Morgan analysts highlighted that America is not lacking in oil, noting that “it holds 277 billion barrels in oil reserves and resources, or about 56 years of supply at the current rate of production”.
They added, however, that, “while reserve levels are not a limiting factor for future production growth, they are … price dependent”.
The analysts stated in the note that a $70 WTI price “represents a level at which there are sufficient reserves to grow crude and condensate production to a peak of 14.3 million barrels per day by 2031, after which it plateaus, up from an average of 13.2 million barrels per day this year”.
“To accomplish this, U.S. oil operators will need to bring 10,600 wells into production, relying on an average of 434 rigs and 230 frac fleets, requiring less equipment than is currently used,” the analysts warned.
“By contrast, in 2024 U.S. operators are projected to drill 10,000 wells, utilizing an average 491 rigs and 244 frac fleets,” they added.
In its latest short term energy outlook (STEO), which was released recently, the U.S. Energy Information Administration (EIA) projected that U.S. crude oil production, including lease condensate, will average 13.23 million barrels per day in 2024 and 13.53 million barrels per day in 2025. Total U.S. crude oil supply came in at 12.93 million barrels per day in 2023, the STEO highlighted.
According to the EIA’s latest STEO, Lower 48 states, excluding the Gulf of Mexico, will make up 11.02 million barrels per day of the 2024 total and 11.30 million barrels per day of the 2025 total. The Federal Gulf of Mexico is projected to make up 1.79 million barrels per day of this year’s total and 1.83 million barrels per day of next year’s total and Alaska is projected to bring in 0.42 million barrels per day of the 2024 total and 0.41 million barrels per day of the 2025 total, the STEO showed.
In 2023, Lower 48 states, excluding the Gulf of Mexico, made up 10.64 million barrels per day of the total, while the Federal Gulf of Mexico comprised 1.87 million barrels per day and Alaska comprised 0.43 million barrels per day, the STEO highlighted.
The EIA’s latest STEO projected that the WTI spot price will average $77 per barrel in 2024 and $71.60 per barrel in 2025. The WTI spot price averaged $77.58 per barrel in 2023, the STEO showed.
A separate research note sent to Rigzone by the JPM Commodities Research team last Friday showed that J.P. Morgan expects the WTI crude price to average $77 per barrel in 2024 and $71 per barrel in 2025.
In a release sent to Rigzone last month by Rystad Energy, Rystad outlined that the U.S. shale oil sector is “unlikely to be significantly impacted” by the outcome of the U.S. election.
“Despite the rhetoric and policy platforms from the two candidates, Vice President Kamala Harris and former President Donald Trump, the tight oil sector is expected to continue its steady growth, driven more by market forces and company strategy than by government policy,” Rystad noted in that release.
“The industry’s focus on profitability and shareholder returns, rather than chasing production growth, means that operators are unlikely to be influenced by promises of support or potential regulations from either candidate,” it added.
In that release, Matthew Bernstein, Senior Analyst of Upstream Research at Rystad Energy, said, “the U.S. onshore industry has learned to live with a high degree of uncertainty, and the presidential election is just one of many factors on operators’ radars”.
“Shale production has proven to be incredibly resilient, and we expect it to continue to play a major role in the global energy landscape for years to come. At the end of the day, the industry is driven by market fundamentals, not by politics,” he added.
