US onshore decline

Rystad sees non-GOM Lower 48 oil production drop extending into 2nd half 2021

Steve Sutherlin

Petroleum News

Onshore oil production from the Lower 48 states will begin a gradual decline from September forward, before beginning an upward trajectory in the second half of 2021, according to Rystad Energy projections released Sept. 30.

“Onshore drilling remains below the level required to maintain production in nearly all U.S. oil basins, despite a robust fracking exercise where operators are bringing on line their inventory of drilled but uncompleted wells,” Rystad said.

Onshore Lower 48 production peaked at 9.2 million barrels per day in August following back-to-back increases since June, Rystad said. The climb helped push the nationwide total above 11 million bpd and is likely to keep it above that mark for the rest of the year, Rystad estimates.

“We still anticipate U.S. oil output to average at 10.82 million bpd in 2021,” said Rystad Head of Shale Research Artem Abramov. “A gradual decline is expected in the first half of the year, followed by a recovery in the fourth quarter.”

The lower supply projections may salve fears that a sustained recovery in demand is in danger due to new COVID-19 case outbreaks.

Prices dove sharply Sept. 29 to the lowest level in two weeks, taking Alaska North Slope and West Texas Intermediate crude below $40. ANS dropped $1.42 to $39.73, WTI dropped $1.31 to $39.29, and Brent fell $1.40 to $41.03.

Rystad said preliminary well production data for July had been reported for almost all the major oil and gas producing states.

After recovering by around 540,000 bpd in June, oil volumes for Lower 48 states excluding the Gulf of Mexico seemingly posted a second monthly increase of more than 400,000 bpd in July, Rystad said, adding that it estimates another rise of 230,000 bpd in August from the same regions, which would take the total for the month to a peak of 9.2 million bpd.

Production from the Gulf of Mexico and Alaska gained between 160,000 bpd and 170,000 bpd in July, Rystad said.

In July, ConocoPhillips began to restore a cut in Alaska production after a ramp down which began in late May. The cut was a reaction to the drop in demand due to COVID-19 and the resulting steep drop in oil prices.