US oil

now browsing by tag

 
 

Is the shale gas revolution over?

While everyone is watching the oil bust, there is another bust going on — one for natural gas.

Before there was a boom in oil production in the United States, there was the “shale gas revolution.” That is where we all became familiar with terms like “fracking.” And the Marcellus, Haynesville, and Barnett Shales were famous long before the Bakken or Permian.

The surge in natural gas production crashed prices, fueling a huge increase in activity in petrochemicals and causing a major switch from coal to natural gas in the electric power industry. Aside from a few brief moments (such as the winter of 2014), natural gas has mostly traded around $4 per million Btu (MMBtu) or lower since the financial crisis of 2008.

MORE: Environmental groups target fossil fuel production on federal lands

But unlike oil, the boom in shale gas did not stop with plummeting prices. U.S. natural gas production continued to climb. For example, production from the prolific Marcellus Shale – which spans Pennsylvania, West Virginia and Ohio – skyrocketed from less than 2 billion cubic feet per day (bcf/d) in 2009, to a record-high of over 16.5 bcf/d this year. And the dramatic ramp up in production occurred over several years when prices were extremely low.

MORE: Oil industry influence waning amid oil price slump

Much of that has to do with the huge innovations in drilling techniques, including fracking and horizontal drilling, which allowed for production to remain profitable despite the downturn in prices. But some of the credit also goes to drillers searching for more lucrative natural gas liquids and crude oil. Dry natural gas is produced in association with oil. With oil prices extremely high, especially in the period between 2010 and 2014, drillers continued to produce natural gas even if they were looking for oil.

MORE: For Canadian oil sands, It’s adapt or die

So only after oil prices busted did natural gas production start to slow down. In fact, while the markets are eagerly watching for declines in oil production, few are noticing that natural gas production is also declining. The EIA reports that in October, several of the largest shale gas regions will post their fourth month in a row of production declines. With a loss of around 208 million cubic feet per day expected in October, the four-month drop off will be the longest streak of losses in about eight years.

It is no surprise that the Eagle Ford will represent the largest losses, with a decline of 117 million cubic feet per day expected in October. That is because oil is a much more prized commodity in South Texas, so the decline is largely attributable to disappearing crude oil rigs.

While U.S. shale gas remained resilient through several years of low natural gas prices, the collapse in oil prices are finally putting an end to the boom.

OilPrice.com is a USA TODAY content partner offering oil and energy news and commentary. Its content is produced independently of USA TODAY.

US oil settles up 93 cents, or 2 pct, after Wednesday’s big losses

US oil settles up 93 cents, or 2 pct, after Wednesday’s big losses

Oil

Lucy Nicholson | Reuters

Oil prices rose as much as 2 percent on Thursday as traders covered short positions a day after crude futures were hammered by weak U.S. demand for fuel during the traditionally busy summer driving season.

Key crude benchmarks Brent and U.S. West Texas Intermediate (WTI) lost about 4 percent on Wednesday as a raft of bearish U.S. inventory data heightened concerns about a global glut.

Oil was also helped higher on Thursday as the dollar weakened on the pound’s rally after the Bank of England’s surprise decision not to cut rates.

A weaker dollar tends to make greenback-denominated oil more attractive to holders of other currencies. The UK central bank was widely expected to ease after Britain’s vote last month to leave the European Union caused market turmoil.

Oil Recovery

ANZ: Oil market on track for a rebalance

The perception that the previous day’s move was excessive also supported crude.

“It’s always the case a day after a big rally or sell-off for people to feel it was overdone,” said Phil Flynn, an analyst with Chicago brokerage Price Futures Group.

“The argument is also on what’s the fair price for oil? I think $44 is a good support, as $40 or below will again deter investments,” he said.

Brent crude oil traded 2 percent higher, up 94 cents, at $47.20 a barrel, off a session peak of $47.47.

U.S. crude settled up 93 cents, or 2 percent, at $45.68, after rising as high as $45.80 earlier in the session.

U.S. crude stocks fell less than expected last week, while distillate inventories rose the most since January and gasoline stocks unexpectedly increased, the Energy Information Administration (EIA) said on Wednesday.

Many had expected record driving trips and low pump prices to boost gasoline usage this summer. A glut in refined products globally is putting crude under pressure, with Middle East grades in particular hit by low Asian demand.

Adding to the bearish picture, the International Energy Agency (IEA) said on Wednesday a persistent global crude glut weighed on oil despite demand growth and declines in non-OPEC production.

Data on Thursday from market intelligence firm Genscape showed a 171,511-barrels build at the Cushing, Oklahoma delivery hub for WTI futures during the week to July 12, traders said.

Technically, crude may be poised for another fall, said Tamas Varga of PVM Oil Associates in London, who said Brent could break below its 100-day moving average of $44.84 as early as next week.