Shale Oil And Gas Production Projected To Increase In February

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Includes: USO
by: David I. Templeton, CFA

The battle between OPEC and shale fracking producers has pushed the price of oil down to levels unthinkable just a year ago. Both parties seem unwilling to reduce production to levels that would stem the decline in oil prices. This lower price level is certainly placing financial stress on a number of drillers and leveraged fracking companies as noted in the article "Money Dries Up for Oil and Gas, Layoffs Spread, Write-Offs Start."

From The Blog of HORAN Capital Advisors


In spite of the apparent difficulties facing drillers and shale fracking companies, production growth continues to be projected for oil and gas out of the shale regions in the U.S.

From The Blog of HORAN Capital Advisors


Source: U.S. Energy Information Administration

From The Blog of HORAN Capital Advisors


Source: U.S. Energy Information Administration

The U.S. Energy Information Administration released its weekly petroleum report late last week and natural gas inventories declined 236 bcf. This drawdown still left natural gas storage levels higher than at the same time last year, 2,853 bcf vs. 2,571 bcf last year.

The well known headwinds facing the various companies in the energy sector have yet to result in a reduction in oil and natural gas supplies. With the new layoff announcements, capital expenditure cuts and financing difficulties by some energy companies, a reduction in supply may ultimately be realized over the next several quarters. The market is anticipating some stabilization in crude prices as noted by the short term price chart for crude oil. However, this may be premature given the continued growth in oil and natural gas production levels as noted earlier.

The end result is a continued increase in supply as reduced demand seems to be an issue as well. In the weekly petroleum report, the EIA noted, "U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 5.4 million barrels from the previous week. At 387.8 million barrels, U.S. crude oil inventories are at the highest level for this time of year in at least the last 80 years. [emphasis added]"

From The Blog of HORAN Capital Advisors