US oil companies have increased production by 1.2m barrels a day over the past six weeks, as they restore wells shut earlier this year and start producing from others they left unfinished as prices sank.
Output bottomed out at 9.7m b/d in the second week of June but has since risen to 10.9m b/d as activity starts to pick up in the big shale fields of Texas, according to Genscape, a division of consultancy Wood Mackenzie that monitors energy flows. That figure is more than the UK’s entire crude production of 1.1m b/d.
US production should now stabilise at about 11m b/d through to the end of 2020, analysts said. That is well below the 13m b/d in March before the Saudi-Russian price war and coronavirus pandemic devastated US oil prices.
“It’s a slow, slow recovery, but it’s happening,” said Alexandre Ramos-Peon, a senior analyst at Rystad Energy, a consultancy.
Despite the restarting of wells shut around the time the US oil price plunged below zero in April, drilling activity remains weak. The number of operating rigs was just 251 last week, compared with about 800 in January.
But oilfield services companies say activity is beginning to pick up as operators redeploy crews to bring drilled-but-uncompleted wells into production. Hydraulic fracturing, or fracking, uses water, sand and chemicals pumped into a well to open small cracks that will release the oil or gas.
The rise in fracking will ease fears that production could slip into an even more severe downward spiral.
Shale is unusual in the oil business because a typical well produces prolifically for a year before output drops steeply and then settles into a modest and diminishing flow rate thereafter. That means thousands of wells must be drilled each year just to hold overall output steady.
The number of so-called frac crews carrying out well-completion work crashed to a low of 45 in May, just 10 per cent of the levels a year earlier, according to Primary Vision, an oilfield data provider.
But the research firm said 62 frac crews were now operating across the country. Rystad estimated more than 400 wells would be fracked this month, up from a low of 325 in June.
US shale basins hold more than 7,000 wells that have been drilled but await completion, according to the federal Energy Information Administration.
That leaves a large inventory of wells for operators to bring into production. Even so, a sustained recovery in output would need more drilling, say analysts.
“The stock of uncompleted wells is like a savings account for the industry,” said Ian Nieboer, a managing director at RS Energy Group, a consultancy. “It buys time — but even treading water to keep production flat will become difficult if drilling activity doesn’t increase.”
Last year more than 14,000 wells were drilled in the US, but fewer than half that number would be drilled in 2020, said Mr Nieboer.
Rystad predicts US production will grow by about 500,000 b/d in 2021, after hovering around 11m b/d for the remainder of this year. That is well below the growth rates of recent years.
“We would need to see fracking activity return to the thousands (of wells) in order to see such a production growth,” said Mr Ramos-Peon.
“Right now it’s like a reset to the industry. Lots of bankruptcies, lots of disenchantment, less capex. But it’s still profitable to continue growing at these prices.”