- While overall US production was up, a better indication of the health of the US oil industry can be gleaned by looking more closely at the on-shore L48 states.
- In August there were close to 211 oil rigs operating in Texas. By the last week of October, 233 oil rigs were operating, an increase of 22 rigs and production was down.
- Since the end of September, the addition of rigs in the Permian basin has accelerated over the average rate as the red graph breaks away to the upside from the green trend line.
A guest post by Ovi
All of the oil (C + C) production data for the US state charts comes from the EIA's Petroleum Supply monthly PSM.
U.S. October production rebounded by 651 kb/d to 11,473 kb/d. The rebound is largely due to increased production in the GOM. GOM output increased by 680 kb/d after the damaged platforms were repaired and brought back on line. The one red marker is the MER’s output expectation for November.
While overall US production was up, a better indication of the health of the US oil industry can be gleaned by looking more closely at the on-shore L48 states. In the on-shore lower 48, October production decreased by 36 kb/d to 9,292 kb/d. The main contributors to the decrease were Texas and New Mexico, partially offset by gains in Colorado and Louisiana.
Listed above are the 10 states with the largest US production. These 10 accounted for 81.6% of US production out of a total production of 11,473 kb/d in October 2021.
Of the 23 kb/d MoM decrease from these ten states, the largest drops came from Texas with 44 kb/d and New Mexico with 23, offset by gains in Colorado and Louisiana. On a YoY basis, US production increased by 1,034 kb/d.
Texas production decreased by 44 kb/d in October to 4,906 kb/d. Relative to April 2021, production is up by 69 kb/d, or an average of 11.5 kb/d/mth.
In August there were close to 211 oil rigs operating in Texas. By the last week of October, 233 oil rigs were operating, an increase of 22 rigs and production was down. Surprising?
At the end of 2022, 253 oil rigs were operational.
October’s New Mexico production dropped for a second month in a row by 23 kb/d to 1,333 kb/d. While October is showing a drop, it should be noted that August’s original 1,346 kb/d was revised up by 32 kb/d to 1,378 kb/d in today’s PSM.
In July 75 oil rigs were operating. By October they had increased to 85 and to 94 by year end. It is not clear why New Mexico’s output dropped in September and October with the increasing rig count. While there may be future upward revisions, it is unlikely that the two month downward trend shown will change.
There appears to be a disconnect between the DPR/LTO reports which show estimated and increasing production in the Permian and the two months of output decreases in New Mexico and a one month decrease in Texas as reported by the EIA actual production numbers.
Recall the DPR/LTO output data published in the previous post showed no signs of a production decrease in the Permian. For reference recall the next chart that was posted last week in the previous post.
Permian output, as shown in the previous post, is projected to reach a new production high of 5,031 kb/d in January. From June to January production is forecast to increase by 481 kb/d or at an average rate of 68.7 kb/d/mth.
There is a definite disconnect between this chart and the previous two for the months of September and October.
According to the EIA, North Dakota’s October output was 1,101 kb/d, a decrease of 1 kb/d from September. This flattening of output in North Dakota is more consistent with the LTO/DPR reports posted last week.
Alaskaʼ s October output increased by 7 kb/d to 437 kb/d as maintenance was completed. One year ago, production was 459 kb/d in October, 22 kb/d higher than this year’s 437 kb/d. According to the red trend lines, the annual drop rate is closer 16.75 kb/d/yr (12 x 1.396).
Coloradoʼ s October output increased by 15 kb/d to 411 kb/d. Colorado had an average of 9 rigs operating in October down from 10 in July and production increased.
Here is a headline from. “Occidental’s oil production, drilling pace rise in Colorado as prices and profit return”. Unfortunately it is behind a paywall.
Oklahoma's output in October increased by 5 kb/d to 402 kb/d.
During August, Oklahoma had 29 rigs operating and by the end of October they increased to 43. By year end 49 were operational. The increase in rigs has managed to turn production around.
California's slow output decline continued in October. Output decreased by 1 kb/d to 353 kb/d.
Wyoming's production has been essentially flat since March. In October output decreased by 1 kb/d to 235 kb/d. Wyoming had 17 oil rigs operating in September but by the end of December had decreased to 13.
October's production increased by 1 kb/d to 104 kb/d. Utah had 11 oil rigs operating in September and by December the number had dropped to 8.
Louisiana's output increased by 19 kb/d to 82 kb/d in October. Louisiana was one of the hardest hit states by hurricane Ida in late August. October’s output increase indicates that Louisiana is on the road to recovery.
Production from the GOM increased in October by 680 kb/d from 1,084 kb/d to 1,744 kb/d. If the GOM was a state, its production would normally rank second behind Texas.
The December STEO projection for the GOM output has been added to this chart and projects output will be 1,940 kb/d in December 2022. The December STEO forecast for the GOM output for October 2021 was 1,700 kb/d, a very good estimate, off by only 44 kb/d.
A Different Perspective on US Oil Production
The Big Two states
To get a different perspective on US oil production, the above two charts have broken US production into “The Big Two” and the “On-Shore L48 W/O Big Two” or The Rest.
The production decrease in the Big Two states is a big shock and surprise. The output from these two states is from the Permian and the Eagle Ford basins. Since the Eagle Ford’s output is essentially flat, the output from these two states reflects what is really happening in the Permian.
The rest of the L48 states show a very small increase of 48 kb/d since April. Of the 31 kb/d increase in October, 19 kb/d came from Louisiana which is recovering from the shut down of wells due to hurricane Ida.
Since the beginning of April, the US has been adding oil rigs at a rate of close to 3.65 rigs/wk. Of these, the Permian has been adding 1.15 rigs/wk over the period April to early September. This means that more rigs were being added in other basins and states. The total oil rig count for the week ending Dec 31 was unchanged at 480.
Since the end of September, the addition of rigs in the Permian basin has accelerated over the average rate as the red graph breaks away to the upside from the green trend line. In the week ending December 31, the Permian rig count dropped by 1 to 293.
The WTI February contract settled on December 31 just below the 50 day moving average at $75.21/bbl. The recovery from the August low of $62.32/bbl can largely be attributed to the initial over reaction to the Omicron variant and how it would affect the economy and oil demand.
On December 31, after settling above the 50 day MA, WTI dropped below the 50 day MA because the market believed that OPEC+ would add an additional 400 kb/d of supply to the market and possibly over supply it. However some OPEC and Non-OPEC participants have not been able to meet their output target and the February increase would help offset OPEC’s + pledge shortfall.
World Oil Production
World oil production increased in September by 330 kb/d to 77,673 kb/d according to the EIA. Of the 330 kb/d increase, the two biggest contributors to the increase were Russia 250 kb/d and Kazakhstan 76 kb/d. US output dropped by 381 kb/d.
This chart also projects World oil production out to December 2022. It uses the December STEO report along with the International Energy Statistics to make the projection. (Red markers) It projects that World oil production in December 2022 will be 81,703 kb/d, 1,491 kb/d lower than the January 2020 pre-pandemic output of 83,194 kb/d.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
This article was written by