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US shale oil growth slows as price crash idles drilling rigs
[NEW YORK] The biggest slowdown in oil drilling on record is showing signs of reining in the US shale boom.
US shale oil output is expected to post the slowest growth in more than four years in April, the Energy Information Administration said today. That follows a 41 per cent plunge since December in the number of drilling rigs seeking oil.
A slowdown in US output would come at the same time that refineries are expected to return from seasonal maintenance and bring relief to an oil market that has seen prices decline more than 50 per cent since June. Companies had 444.4 million barrels of oil in storage in the US as of Feb 27, the most in weekly records dating back to 1982.
"You have refineries coming back out of maintenance, and production getting cut back," said Carl Larry, head of oil and gas for Frost & Sullivan LP in Houston. "Everything could come together where, all of a sudden, everyone thought there was plenty of supply and there's not." Oil production from six major US shale plays will be 5.6 million barrels a day in April, an increase of 298 over March, according to the EIA's estimate. It's the smallest projected increase since February 2011.
Output from the Eagle Ford in Texas, the second-largest oil field in the US, is expected to drop by 10,000 barrels a day. Production in the Bakken region in North Dakota is expected to decline by 8,000. It's the first month both regions are forecast to have shrinking production since January 2009.
Production in the Permian Basin in West Texas and New Mexico, the largest US oil field, will rise by 21,000 barrels a day to 1.98 million.
Refineries processed 15.1 million barrels of crude a day the week of Feb 27. Last year, crude demand rose from 15 million barrels a day in the middle of March to 16.6 million in July. Refineries typically shut units for planned maintenance in the late winter and early spring to be able to run at full capacity during the summer driving season.
The EIA's oil-production estimates are based on the number of drilling rigs in different plays and calculations of how productive each piece of equipment is. The number of rigs drilling for oil fell to 922 on Friday, according to oilfield service company Baker Hughes Inc. Oil rigs in the US peaked in October at 1,609.