The steep slide in oil production across major U.S. shale plays is moderating as drillers send more machines back into the oil patch, the Energy Information Administration says.
In a report this week, the EIA said it expects seven plays in Texas, North Dakota and elsewhere to put out 30,000 fewer barrels each day in November, bringing combined output in those regions to 4.43 million barrels a day.
That’s the gentlest decline since the oil production numbers began falling in May 2015. And it’s well below the average drop of 110,000 barrels a day from December to August.
Drillers have redeployed 116 oil rigs into domestic fields since May, as crude prices have risen, and the activity may accelerate after the Organization of Petroleum Exporting Countries reached a proposed agreement to cap output last month in Algiers.
At the OPEC meeting, the Saudi-led cartel signaled it would resume its role trying to manage global oil supply, a strategy change that marks a clear turning point for oil markets after Saudi Arabia and its Persian Gulf allies spent two years waiting for low energy prices to naturally curb high-cost oil production in the United States and elsewhere.
Michael Wittner, an oil market analyst at Société Générale said that reversal is likely more important than whether an OPEC deal to freeze actually materializes by the end of November, OPEC’s self-imposed deadline for ironing out the details of the agreement.
“They’ve gone beyond talking up the market,” Wittner said. “They’re trying hard to make a deal. It’s a very big signal to the market.”
“If you’re a producer or a service company, you want it to happen,” he said.
Société Générale believes domestic crude production, including from fields outside of the shale plays, will hit bottom in the second quarter of next year.
Several firms have said they’d increase oil field spending and boost drilling activity if crude rose to between $50 and $60 a barrel. British bank Barclays noted some U.S. oil explorers could see “double digit” growth in oil production without taking on new lines of credit if domestic crude prices stayed above $50 a barrel.