Oil and Gas Production in the US Decelerates Amidst Falling Prices
The oil and gas industry in the United States is experiencing a slowdown in production due to the fall in crude and commodities pricing. According to a survey conducted by the Federal Reserve Bank of Dallas, business activity growth in the second quarter of 2023 among 150 oil and gas groups in its region posted a score of zero, the lowest since 2020 when oil prices crashed due to the pandemic. The survey respondents cited weak oil and gas prices and high costs as the reasons behind the standstill in growth. Michael Plante, senior research economist and adviser at the Dallas Fed, stated that they are uncertain of what to expect as the highs were too high and the lows were too low.
The survey participants expect a West Texas Intermediate oil price of $77 per barrel by year-end 2023. However, they anticipate a Henry Hub natural gas price of $2.97 per million British thermal units by the end of this year. Energy services firm Baker Hughes Co. also echoed similar views and noted that US energy firms cut the number of oil and natural gas rigs operating for an eighth week in a row for the first time since July 2020. The oil and gas rig count, an early indicator of future output, fell by five to 682 at the end of last week, the lowest since April 2022. Baker Hughes said that puts the total rig count down 71 rigs, or 9 percent, over this time last year.
The prospects for shale oil production in the US currently depend on how the global economy develops in the coming months. Oil prices will rise, and drilling will again become profitable if the global economy recovers, along with acceleration in growing demand. On June 22, the Energy Information Administration reported that US crude inventories fell by 3.8 million barrels to 463.3 million barrels in the week ended on June 16.
Impact of Falling Prices on the Oil and Gas Industry
The fall in crude and commodities pricing has had a significant impact on the oil and gas industry in the United States. The industry has experienced a slowdown in production, with many operators closing rigs and cutting headcounts. The low oil and gas prices have made it difficult for companies to make a profit, leading to a standstill in growth.
The survey conducted by the Federal Reserve Bank of Dallas showed that business activity growth in the second quarter of 2023 among 150 oil and gas groups in its region posted a score of zero, the lowest since 2020 when oil prices crashed due to the pandemic. The survey respondents cited weak oil and gas prices and high costs as the reasons behind the standstill in growth.
The fall in crude and commodities pricing has also led to a decrease in the number of oil and natural gas rigs operating in the United States. Energy services firm Baker Hughes Co. noted that US energy firms cut the number of oil and natural gas rigs operating for an eighth week in a row for the first time since July 2020. The oil and gas rig count, an early indicator of future output, fell by five to 682 at the end of last week, the lowest since April 2022. Baker Hughes said that puts the total rig count down 71 rigs, or 9 percent, over this time last year.
Prospects for Shale Oil Production in the US
The prospects for shale oil production in the United States currently depend on how the global economy develops in the coming months. Oil prices will rise, and drilling will again become profitable if the global economy recovers, along with acceleration in growing demand.
The survey conducted by the Federal Reserve Bank of Dallas showed that the survey participants expect a West Texas Intermediate oil price of $77 per barrel by year-end 2023. However, they anticipate a Henry Hub natural gas price of $2.97 per million British thermal units by the end of this year.
The FT report further added that the prospects for shale oil production in the US currently depend on how the global economy develops in the coming months. Oil prices will rise and drilling will again become profitable if the global economy recovers, along with acceleration in growing demand.
Conclusion
The fall in crude and commodities pricing has had a significant impact on the oil and gas industry in the United States. The industry has experienced a slowdown in production, with many operators closing rigs and cutting headcounts. The low oil and gas prices have made it difficult for companies to make a profit, leading to a standstill in growth. The prospects for shale oil production in the United States currently depend on how the global economy develops in the coming months. Oil prices will rise, and drilling will again become profitable if the global economy recovers, along with acceleration in growing demand.