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Running in place: Natural gas shale production again seen falling for 5th straight month

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Running in place: Natural gas shale production again seen falling for 5th straight month

Productionof natural gas from shale resources is expected to fall at an increasing rateagain in May; however, revisions once again pushed the peak in production laterin time than originally thought.

Thelatest installment of the "Drilling Productivity Report" published bythe U.S. Energy Information Administration on April 11 showed that total outputof natural gas across seven key shale plays is likely to fall 490.15 MMcf/d inMay from April, or about 1.1%, to 45.93 Bcf/d compared to 46.42 Bcf/d in April.

Revisionspushed production higher but were not as significant as . Production expectations forApril were revised up 113.20 MMcf/d to 46.42 Bcf/d from 46.31 Bcf/d originallyreported. Additionally, the peak in production, which was reported to have beenmade in November 2015 at 47.16 Bcf/d, was changed to December 2015 at 47.29Bcf/d.

Thedecline in output in May will mark the fifth consecutive drop since theproduction peak in December 2015, and the EIA has continually pushed back itsestimated declines in output. The agency originally reported that the first decline would takeplace in May 2015 following a peak in April 2015 at 45.99 Bcf/d, according tothe DPR that was published on April 13, 2015.

Productionof natural gas has fallen as futures prices have dropped from a high near$6.50/MMBtu in February 2014 to a low of $1.611/MMBtu on March 4. May gas futuressettled at $1.912/MMBtu on April 12.

Whileshale resources and production are found in many U.S. regions, the EIA's DPRfocuses on the seven most prolific areas, which are located in the Lower 48.These seven regions accounted for 92% of domestic oil production growth and alldomestic natural gas production growth during 2011-14, according to the EIA.

Productionof natural gas is anticipated to fall sequentially in all basins covered by theDPR except for the Utica, which is expected to gain 0.03% sequentially, or 1.15MMcf/d, in May.

On avolume basis, output from the Eagle Ford is projected to fall the mostsequentially and post a decline of 212.53 MMcf/d in May, while the productionfrom Niobrara may fall the second most with a drop of 83.09 MMcf/d. The EagleFord is expected to fall the most on a percentage basis by dropping 3.3% fromthe previous month.

Crudeoil production has declined more regularly than natural gas and is anticipatedto make its thirteenth drop in the last 14 months in May, according to the EIA.The fall would be the seventh consecutive.

Oilproduction from shale resources is expected to fall 114.99 Mbbl/d from theprevious month to 4.84 MMbbl/d in May, or about 2.3%. The decline puts outputat 11.0% below the same month a year earlier and at the lowest level since July2014.

Datafor April was revised 79.88 Mbbl/d higher to 4.95 MMbbl/d from 4.87 MMbbl/doriginally. The peak in production still reportedly occurred in March 2015although the level of production was raised to 5.51 MMbbl/d from 5.49 MMbbl/dprojected in the previous DPR.

Productionhas fallen as prices dropped from a high just below $108/bbl in June 2014 to alow of $26.05/bbl on Feb. 11. April crude oil futures settled on April 11 at$40.36/bbl.

Shaleproduction is expected to fall in all seven of the shale plays tracked by theEIA in May.

Outputfrom the Eagle Ford is expected to fall the most on a volume basis with asequential drop of 62.10 Mbbl/d in May, and the play also leads on a percentagebasis with a decline of 5.0%. The gas-rich Niobrara may see production fall thesecond most on a percentage basis with a drop of 3.8%, while the Bakkenproduction declines are the second largest on a volume basis with a drop of31.29 Mbbl/d.

Market prices and includedindustry data are current as of the time of publication and are subject tochange. For more detailed market data, including powerand naturalgas index prices, as well as forwardsand futures,visit our Commodities Pages.