Industry Trend Analysis - Production To Pressure OPEC Cut Into H2 - MAY 2017

BMI View: Well completion rates in the US onshore ticked up in January, which will result in a stronger reaction from US oil output around May. This will only have a marginal impact on the OPEC/non-OPEC production cut over H117, though will place additional pressure to maintain the production cut over H217.

Given the front heavy production profile of US light tight oil, output from shale is closely correlated to the rate of well completions. On a monthly basis over the last three years, the highest number of wells completed in the US lower 48 was in October 2014. In reaction to this, production from US shale plays peaked in March 2015, creating around a five to six month time indicator from well completions to impact on production. As completion rates fell with oil prices over 2015, so production followed.

Since May 2016, the number of oil directed rigs has risen 286 units, almost doubling to 602 at the end of February 2017. There has been a subsequent uptick in the number of wells drilled in the lower 28, but as we highlighted in early February, completions have not been keeping pace ( see ' Bottleneck In Pressure Pumping As DUCs Grow ' , February 6 2017).

Five To Six Month Production Lag
L48 Drilled & Completed Wells vs Production (000b/d)
Source: DOE, BMI

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