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Oil Drilling Slows as Crude Price Drops
The U.S. oil boom is slowing down as drillers cut back in response to lower crude prices, according to new data set to be released on Wednesday.
uary across the continental U.S. than they did last June, before oil prices started falling from more than $100 a barrel to about $50 today, according to the study by Rice University’s Baker Institute for Public Policy.
But the amount of new crude they can pump from wells drilled in January totals an estimated 515,000 barrels a day, only 8.5% less than from the wells drilled in June, according to data provided for the study by DrillingInfo, an analytics firm.
Energy mavens around the world are watching for any sign that American oil companies are pumping less crude as a glut of petroleum has sent global prices plunging by about 50% since June. Rising U.S. production from shale fields has been a big contributor to the glut, along with tepid demand for oil in economies around the world.
The new data suggest that U.S. shale producers are responding faster to the drop in prices than energy companies have in the past, which could translate into lower production and hasten a recovery in crude prices. Shale wells roar into life and then decline more quickly than conventional wells.
“You’ve got this nimble new mode of production that can enter the market and exit the market quickly,” said Jim Krane, an energy fellow at Rice University and lead author of the study. In contrast to previous oil busts, he adds, “now you have a supplier that is price-sensitive and can curtail supply quickly.”
The report is based on new onshore wells drilled in most states in the continental U.S., provided by DrillingInfo, and on drilling rigs tracked by Baker Hughes Inc., an oil-field services company. The DrillingInfo data include wells that have been drilled but aren’t necessarily pumping oil yet; the firm estimates how much oil the wells can tap based on the average peak production of similar wells drilled nearby.
The findings echo similar points made by two analyses earlier this week. The U.S. Energy Information Administration found that oil production is increasing at a slower rate in four big producing regions of the U.S.; the agency estimates that U.S. producers pumped about 9.2 million barrels a day in January. The International Energy Agency similarly projected slower growth in U.S. production as a result of lower prices.
The U.S. oil price fell $2.84, to $50.02 a barrel on Tuesday, but remains 12.5% higher than its lowest point this year.
The retreat in drilling isn’t uniform across the U.S., and it is still difficult to determine where the cutbacks will be the harshest. In some drilling hotbeds, like the Eagle Ford Shale of South Texas, the number of new oil wells actually increased during the months when oil prices fell most steeply, from November to January, according to the Rice study.
The Permian Basin, in West Texas and New Mexico, posted the sharpest decline in new oil wells, adding 15.6% less production capacity in January than in June.
Most of the decline appeared to come from conventional, vertical wells, and not the ones that bore horizontally through the rock and deliver the biggest volumes of oil and gas.
The Bakken formation, which has made North Dakota the second-largest oil-producing state after Texas, also experienced a downturn in new wells. But both the Bakken and the Permian are often impacted by severe winter weather that causes a slowdown. DrillingInfo’s data goes back to March 2014, not long enough to compare current drilling levels with a year ago.
Write to Daniel Gilbert at firstname.lastname@example.org