Can The Shale Boom Avoid These Bottlenecks?

Anecdotally, at least, there have been stories of bottlenecks for more than a year. So far, there has been no obvious impact on overall output. Production from the Permian is exploding, and plenty of market forecasts predict the U.S. will add upwards of 1 million barrels per day over the next year; some say more. Still, there is some evidence that the cost of oilfield services is on the rise. A wider metric that captures total costs for the shale industry also points to cost inflation. This would be consistent with a tighter market for services and equipment. But again, thus far, the production figures continue to climb unimpeded. One factor to keep in mind going forward is that the U.S. EIA is planning on tweaking the way it reports its production figures. Because the weekly production data — a closely watched figure that has a great deal of influence on short-term fluctuations in oil prices — is only an estimate based on the best available data to the agency, it can’t paint a precise picture of what is going on at the ground level with 100 percent accuracy. The EIA has tried to make this clear, but it comes under fire when the data is revised in subsequent weeks and months as better data becomes available. In response, moving forward the EIA will report production figures rounded up to the nearest 100,000 bpd. As such, the most recent data, for instance, shows that the U.S. produced 9.919 mb/d for the week ending on January 26. Under the revised system, that figure would appear as simply 9.9 mb/d. That, the agency argues, will make it clear that the figure is an estimate and not intended to be a precise measurement. This may prevent media types (*ahem*) from reading too much into a figure that inherently involves a bit of guesswork. The flip side is that the data will get more clunky. Standard Chartered argues that because the data will likely stay the same for the next several weeks (at 9.9 mb/d) and then suddenly jump to 10.0 mb/d, it may have a jarring impact on market psychology. “The proposal seems a retrograde step to us, designed more to create a defensive shield of opaqueness around what has unfortunately become a political number, rather than to improve transparency in the market place,” Standard Chartered analysts wrote. Regardless of one’s view, the best bet is to keep an eye on the monthly figures, which are more accurate, although published on a lag. For that, the EIA reported on Wednesday that the U.S. produced a staggering 10.038 mb/d in November, a massive jump of 384,000 bpd from a month earlier. Based on that figure, at least as of November, the shale industry was not being held back by any bottlenecks. By Nick Cunningham of Oilprice.com oilandgasOil and Gas News Undiluted !!! “The squeaky wheel gets the oil” Follow us: @OilAndGasPress on Twitter | OilAndGasPress on Facebook]]>

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