US bank Goldman Sachs narrowed its forecast for the decline in US oil output this year amid producers' efficiency and technology improvements.
US oil output may decline by 650,000 b/d this year, the bank concluded after analyzing producers' first quarter earnings, down from the 725,000 b/d drop forecast after fourth-quarter earning results.
Improving productivity of shales were a key theme in company earnings reports, driven by more efficient drilling and completion operations and better understanding of shale reservoirs. This was particularly true about the Permian basin in Texas and the SCOOP and STACK regions of Oklahoma, Goldman Sachs said.
The productivity gains may limit how far oil prices will rise, however, keeping long-term US benchmark Nymex WTI crude in the $50-$60/bl range. The bank also noted that the price recover in spite of resilient US output and greater-than-expected supply from Iran suggests stronger demand and lower supplies "and a greater near-term call on US oil."
Many US shale oil producers including Continental Resources, Whiting Petroleum, Pioneer Natural Resources and Devon Energy have raised their output guidance for the year, even after making cuts of as much as 80pc to their capital expenditure (capex) from a year earlier. These companies are using the downturn to make shale drilling economical at much lower prices, as the focus shifts to costs rather than output growth.
