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June 12, 2020

US lower 48 short term outlook breakdown by key shale plays

By GlobalData Energy

After almost three months since the start of the Covid-19 pandemic, GlobalData estimates crude oil production in the USL48 to reduce from an average of approximately 10.3 million barrels of oil per day (mmbd) in January 2020 to 8.2mmbd in December. The decline in crude oil production is most apparent in Q2 2020 due to production curtailment strategy adopted by key producers across the USL48. Permian Basin experienced the biggest decline in crude oil summing up to approximate 1mmbd, followed by Bakken and Eagle Ford with 0.6mmbd and 0.2mmbd respectively. Many operators have put a halt in their development plan and forgone their guidance for 2020, however opting to remain flexible to react to the crude oil prices.

As the demand for fuel has dampened due to the current economic slowdown, GlobalData estimates natural gas production to reduce from an average of approximately 98.5 billion cubic feet per day (bcfd) in January 2020 to 92bcfd in December. The natural gas production decline observed in Q2 2020 is mainly due to reduction of associated natural gas in Permian and Eagle Ford summing up to approximately 3.5bcfd and 1bcfd as a result of oil well production curtailment. However, reduced drilling activity seen in Appalachian region caused a decline of approximately 0.6bcfd from January to December 2020 as producers sit back until gas demand recovers. As per GlobalData analysis, natural gas production will start stabilising in Q3 and Q4 of 2020 as drilling activity ramps up slowly, supported by an increased demand heading into winter and the assumption of increased industrial activity.

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