By Arathy Somasekhar
Efficient operations in the top U.S. shale patch are leading to increased oil production without a rise in spending, impacting global oil market supplies as OPEC plans to unwind its output cuts later this year.
Producers are extending wells up to three miles, fitting more wells on a single drilling pad, and fracking multiple wells simultaneously, resulting in higher production levels. Major producers like Chevron, Diamondback, APA Corp, Devon Energy, and Permian Resources have raised their shale oil production targets for the year.
Industry experts predict that the market may become oversupplied in the fourth quarter due to these efficiency gains. Macquarie Group estimates that U.S. production will grow by about 500,000 barrels per day by the end of the year, surpassing government estimates.
Consolidation among shale producers was expected to slow production growth, but companies are now able to extend wells into adjacent areas, boosting productivity. Companies like Diamondback are drilling longer laterals and increasing the number of wells per pad, leading to faster completion times and reduced costs.
Chevron’s deployment of triple-fracking technology has helped in reducing costs and shortening completion times, contributing to increased production days. Total production from the Permian reached 6.2 million barrels per day in June, the second-highest level on record.
Despite falling rig counts, U.S. oil production has consistently exceeded estimates over the years. However, the rate of increase may slow down in the future due to declining rig counts. The number of horizontal oil rigs in the Permian has decreased, which could impact production levels.
Overall, the efficiency gains in the U.S. shale patch are set to impact global oil market supplies and could lead to oversupply in the coming months. Investors and market participants should closely monitor these developments to make informed decisions about their investments in the oil sector.
