Outputof natural gas and crude oil from shale resources is expected to fall again inAugust, although the pace of declines is expected to slow from the ratereported for July.

Thelatest installment of the "Drilling Productivity Report" published bythe U.S. Energy Information Administration on July 18, showed that total outputof natural gas across seven key shale plays is likely to fall 417.68 MMcf/dsequentially, or 0.9%, to 45.72 Bcf/d in August. Production for the month wouldbe 0.6% below the same month a year earlier, and is the first year-over-yeardecline reported during the current down cycle.

Thesequential decline slowed from the 476.85 MMcf/d drop reported in July, whichwas down 1.0% from the prior month. Forecast output in August is 2.98 Bcf/d, oraround 6.1%, below the record high of 48.71 Bcf/d reached in February.

Shaleproduction of crude oil in August is projected to decline 99.31 Mbbl/d, or2.1%, from July to 4.55 MMbbl/d. The rate of decline slowed from the 117.62Mbbl/d, or 2.5%, drop seen in the previous month.

Thedeclines in both natural gas and crude oil could be viewed as a slight positivefor underlying prices, as they continue to provide signals that the energymarkets are rebalancing.