Irina Slav
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
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By Irina Slav – Sep 29, 2024, 6:00 PM CDT
- U.S. oil and gas production growth has slowed down in the third quarter, with oil activity modestly rising while gas production declined significantly.
- Industry executives predict a shift to higher oil prices in the medium term due to reduced U.S. shale output.
- Some experts argue the U.S. shale revolution has peaked, with further major production gains unlikely without a significant price increase.
Activity in the U.S. oil and gas sector slowed down in the third quarter, potentially settling an unofficial debate about the industry: can the boom continue forever, or is it time to take a break? According to the Dallas Fed, it’s time to take a break and take stock.
In its latest energy survey, the Dallas Fed reported that oil activity was slightly higher in the third quarter compared with the second, but gas activity was substantially down, confirming other reports pointing towards curbs in gas production and slower growth in oil production after significant output gains in both last year.
This is the second quarter of modest growth in oil production, per the Dallas Fed, which suggests the slowdown may be a trend rather than a temporary occurrence. There are plenty of reasons for the emergence of this trend, too. One, as usual, is the price of oil and gas. Another, special for this quarter, is the November election and the implications of its outcome.
The importance of prices was highlighted in the special questions section of the survey. Asked by the Dallas Fed whether their companies planned to boost production in the Permian once the current natural gas pipeline shortage was eliminated, as much as 80% of respondents answered in the negative.
The overwhelming majority of respondents also signaled there is plenty of crude oil offtake capacity in the most prolific shale play, with 92% saying they did not expect any oil production constraints from the pipeline segment between now and 2026.
Yet production is not rising as fast as it probably could and as it did last year. And oil companies are not eager to change this, especially right now. In fact, some of them expect much higher oil prices in the medium term because of the decline in U.S. shale.
Related: Oil Jumps as Middle East Tensions Ignite Supply Fears
“We stand by the hypothesis that the world is swiftly running out of $60 barrels on the way to $100+ barrels within the next five years,” one industry executive told the Dallas Fed. “OPEC is being punished short term for ceding market share. To us, it appears to be a savvy “oil storage” policy.”
Savvy oil storage policy or not,