Shale boom to start busting as U.S. output set to fall

HOUSTON – The shale oil bonanza that made millionaires from Texas to North Dakota is slowing down for the first time in years, a sign that painful industry cutbacks are starting to have an impact.

The nation’s oil production is set to slip this month by 57,000 barrels a day as natural declines in older shale wells outpace gains from newly drilled wells, the U.S. Energy Information Administration said in its monthly drilling report on Monday.

More than 70,000 barrels of oil a day are expected to be lost from April to May in North Dakota’s Bakken Shale, South Texas’ Eagle Ford Shale and the Niobrara Shale in Colorado, Wyoming, Kansas and Nebraska. That handily beat out forecasts for Permian Basin’s increase of 11,000 barrels a day in West Texas and the Utica Shale’s 2,000 barrel a day boost in eastern Ohio.

The EIA’s report comes as oil traders are watching for any sign U.S. oil companies will stop pumping as much crude amid an oversupplied global market. Any relief could help lift crude prices after a volatile nine-month slide.

The EIA had said in March the same three shale plays would see output fall in April for the first time in six years. The losses were masked by gains in the Permian Basin.

Oil companies have cut billions out of their spending plans this year and have sent more than 900 U.S. drilling rigs to the sidelines in recent months. But U.S. output could be declining in part because oil companies are storing crude in wells that have been drilled but not completed.

Analysts say firms have reason to start pumping some of the stranded crude as prices have edged up, but they risk flooding the market if they start producing all at the same time. That could keep prices down.

The EIA says output in the Eagle Ford could fall by 33,000 barrels a day to 1.69 million in May; the Bakken is set to decline by 23,000 to 1.29 million; and the Niobrara is expected to see 14,000 barrels a day evaporate, with monthly production dropping to 403,000 barrels a day.