Azernews.Az

By Bloomberg

Oil production from the main U.S. shale plays will grow next month at the slowest pace since 2013 as drillers idle rigs after the biggest drop in prices in six years.

Output from the seven main areas will increase 66,648 barrels of oil a day in March from this month, according to the Energy Information Administration’s drilling productivity report released Monday. That would be the slowest growth since 52,465 barrels in December 2013.

Drillers cut the number of rigs in service to 1,140 by Feb. 6, the lowest since December 2011, Baker Hughes Inc. data show, reacting to a 51 percent drop in U.S. benchmark West Texas Intermediate crude. The Organization of Petroleum Exporting Countries reduced its estimate for U.S. supply growth by 130,000 barrels a day.

“It does have a lot to with with the declining rig count,” Andy Lipow, president of Lipow Oil Associates LLC in Houston, said Monday by telephone. “It should be no surprise we do expect the rate of growth to decline as we go toward the end of 2015 as we see greater effects of rigs being laid up.”

West Texas Intermediate oil for March delivery lost 66 cents to $52.20 a barrel in electronic trading on the New York Mercantile Exchange at 11:34 a.m. Singapore time.

The seven regions analyzed in the EIA report accounted for 95 percent of the 2.5 million barrel-a-day growth in oil production from 2011 through 2013. The U.S. oil boom has been driven by a combination of horizontal drilling and hydraulic fracturing, which has unlocked supplies from the shale formations.

Idling Rigs

Drillers have pulled a record 435 rigs in nine weeks, according to Baker Hughes. The drop of 37 last week in the Permian Basin, the nation’s largest oil field, was the steepest since the services company began reporting basin-by-basin counts in February 2011.

The EIA aggregates data from the Bakken in North Dakota and Montana; Eagle Ford in Texas; Haynesville in Arkansas, Louisiana and Texas; Niobrara in Wyoming and Colorado; Permian in Texas and New Mexico; and the Marcellus and Utica plays in the Northeast and mid-Atlantic region.

Lipow said he believes oil prices will fall again later this year as inventories continue to rise, which should affect future U.S. shale production.

“The world is still awash in oil over the next couple of months,” he said. “I think there’s a significant amount of buying interest between $35 and $40 a barrel. If we get to those ranges, you’d see crude oil put in storage in every nook and cranny around the world, including vessels, waiting for higher prices.”