US oil production is back but future looks tight
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US oil producers have been rapidly bringing wells back online since June but with drilling rig counts still at multi-decade lows, exploration has not come back in the same way.
Energy consultancy Rystad Energy says the pace of reactivation picked up since July.
“Our analysis shows that as much as 373,800 barrels per day (bpd) of net production, or 48 per cent of the cuts made in May, was restored in July, followed by an additional net volume of 232,200 barrels per day slated to be back in August,” the consultancy wrote over the weekend.
“Only a handful of operators intend to wait until September to reactivate the last of their curtailed volumes.”
In the US, Rystad says “most” operators will restore nearly all shut-in oil volumes by the end of the September quarter.
Curtailments peaked in May at a net 772,500 bpd taken off the market.
Total cuts decreased to a net 680,300 bpd in June. In July, only about 306,500 bpd in net volumes remained curtailed. It expects that number to fall to a net 74,300 bpd in August and nearly all production set to be reactivated by September.
In Canada, Whitebark Energy (ASX:WBE) said it would recommence production from its Rex-3 well after installing a subsurface pump.
It has since upgraded its lowest estimate for Wizard Lake reserves to 2.8MMBOE (million barrels of oil equivalent) and mid-range estimate for its resource to 9.4MMBOE.
A resource is a best guess, a reserve is a known size that can be extracted.
However, according to Baker Hughes, an oil services company, North America drilling rigs in use totalled 244 on Friday, down from 935 a year ago and the lowest since the organisation began counting in 1987.
The rig count is an indicator of future output.
The stabilisation in the US oil market — which had been thrown out of kilter when Russia refused to reduce oil production in March and Saudi Arabia retaliated — has helped its benchmarked oil price to rise and level out as well.
The US oil price, West Texas Intermediate or WTI, has risen off the double digit lows seen in April to $US42.23 ($58.78) a barrel.
But some industry watchers warn the rally has been overblown.
Rystad Energy says $US40 is the new normal as valid concerns remain on the demand side, while global resources consultancy Wood Mackenzie also reduced its long-term Brent price assumption from $US60 per barrel to $US50 per barrel.