Oil and gas companies have added to the so-called fracklog for the second consecutive month, signaling a potential slowdown in U.S. shale oil production growth. This trend is marked by shale operators drilling more wells than they are completing. In April, the number of drilled-but-uncompleted (DUC) wells increased, marking the first back-to-back rise since late 2022, according to the U.S. Energy Information Administration (EIA). This backlog is critical as fracking is one of the last steps to bring a new well into production.
The EIA’s latest Drilling Productivity Report indicates that total U.S. shale oil production is forecasted to rise slightly by 0.2% in June to 9.85 million barrels per day (MMbpd). This level still falls short of December’s record of 9.98 MMbpd. The increase in the fracklog to 4,510 wells at the end of April provides companies with the flexibility to boost output when prices are favorable. This strategy allows companies to manage production in response to market conditions, which can lead to higher profitability when prices rise.
Production from major shale regions such as the Permian Basin, Bakken, Eagle Ford, and Niobrara is being closely monitored by OPEC and its allies as they prepare to meet next month. These regions are crucial for global supply dynamics, and any changes in production levels can influence international oil prices. Notably, the Permian Basin is expected to reach a record oil output of 5.693 MMbpd in May, according to the EIA. This increase is part of a broader trend of rising production in key U.S. shale regions, which collectively account for a significant portion of the country’s oil output.
Brent crude, the international benchmark, has climbed roughly 8% this year, recovering most of the 10% decline experienced in 2023. Analysts from JPMorgan Chase & Co. and other institutions have warned that oil prices could approach $100 per barrel due to concerns over global supply disruptions. This potential price surge underscores the importance of U.S. shale production in the global energy landscape.
In addition to oil, associated gas production from shale regions is also notable. For example, gas output from the Permian Basin is expected to reach a record 22.51 billion cubic feet per day (Bcf/d) in May. Similarly, the Haynesville Shale in Louisiana and East Texas is projected to hit a new record of 16.82 Bcf/d. These increases highlight the dual importance of shale regions in contributing to both oil and natural gas supplies.
The buildup of the fracklog also reflects strategic decisions by oil companies to manage infrastructure and market conditions effectively. By delaying the completion of wells, companies can align production with periods of higher prices or better infrastructure availability, such as pipeline capacity. This approach helps maximize revenues and manage operational risks.
In conclusion, the recent increase in the fracklog and the forecasted rise in shale oil and gas production demonstrate the ongoing importance of U.S. shale regions in the global energy market. These developments will be critical factors for OPEC and other global oil producers as they assess market conditions and make decisions about future production levels. As U.S. shale production continues to evolve, it will remain a key determinant of global oil and gas supply dynamics.
