US Shale Oil Output Seen Surging If Crude Reaches $60 a Barrel

US Shale Oil Output Seen Surging If Crude Reaches $60 a Barrel
Crude at $60 a barrel would probably trigger a strong increase in North American oil output, the head of the IEA says.

(Bloomberg) -- Crude at $60 a barrel would probably trigger a strong increase in North American oil output, the head of the International Energy Agency said, amid signs that OPEC members and Russia may be edging toward an agreement to limit production.

Benchmark Brent crude hit a one-year high above $53 a barrel on Monday when President Vladimir Putin said Russia was willing to work with the Organization of Petroleum Exporting Countries to stabilize the market. A deal could lift prices as high as $60 by the end of this year, Saudi Arabia’s Energy and Industry Minister Khalid Al-Falih said at the World Energy Congress in Istanbul.

If prices reach $60 and stay there, U.S. shale drillers could find it commercially viable to revive production at some mothballed wells and boost output by more than 1 million barrels a day by early 2018, according to Vienna-based consultant JBC Energy GmbH.

“We may well see, in a short period of time, strong production growth coming from North America and elsewhere,” IEA Executive Director Fatih Birol said Tuesday in a Bloomberg TV interview with Manus Cranny and Anna Edwards. “Prices around $60 would be sufficient.”

OPEC Policy

Brent slid from more than $115 a barrel in June 2014 to less than $28 in January this year. Prices tumbled after OPEC, led by Saudi Arabia, adopted a policy of pumping without limits to try to squeeze higher-cost production, including some U.S. shale output, from the market. U.S. crude production slumped to 8.43 million barrels a day in September from 9.42 million the previous year, according to IEA data.

Brent crude climbed to $53.14 a barrel on Monday as Russia’s Putin said the world’s largest energy exporter was ready to join OPEC in restraining oil production either with a freeze or a cut. The international pricing benchmark has gained almost 15 percent since OPEC agreed last month on the first supply curbs in eight years, and it was trading near $53 a barrel on Tuesday.

Rig Count

Some U.S. producers have already stepped up operations. The number of active oil-drilling rigs in the U.S. has climbed from 328 in early May to 428 last week, according to Baker Hughes Inc.

Bjarne Schieldrop, chief commodities analyst at SEB AB bank in Oslo, said he expects the number of active U.S. rigs to rise by about 10 per week until OPEC holds its next formal meeting on Nov. 30.

“As soon as OPEC moves into a position of trying to manage the price, it basically takes care of the downside risk,” Schieldrop said by phone. “The consequence is increased U.S. production.” If crude reaches and holds steady at $60, he said he expects U.S. output to rise by at least 500,000 barrels a day by the end of 2017.

U.S. shale drillers could add from 1 million to 1.5 million barrels a day within the next year and a half, if prices stay at that level, JBC Energy said in an e-mailed note.

With assistance from Manus Cranny, Anna Edwards and Angelina Rascouet. To contact the reporter on this story: Sam Wilkin in Dubai at To contact the editors responsible for this story: Bruce Stanley at Amanda Jordan


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Charles Drobny  |  October 14, 2016
Have we completely dismissed the centuries old laws of economics along with the practical concept of supply and demand equilibrium? The speculative rise in price due to a Russian comment or OPEC faux unenforceable decision to restrict production? If the global economy does not cause an increase in consumptive use against a unfulfilled supply at the equilibrium price, that price will not increase. All this talk is promise, posturing and pontification does not impact the reality that increased production if not consumed will only go into already swelled storage. The World has PLENTY of recoverable and producible hydrocarbons to satisfy demand at the current price. If producers are unwilling to sell at lower prices that demand will not expand on account of lower price. Conversely without increased need to use more at the present price additional production will do nothing to sustain a speculative price increase like the one this week over $50.
Rudolf Huber  |  October 12, 2016
No oil supply squeeze will iron out the latent accounting hoax in all things commodity. The world economy must contract in order to correct ballooned books and that will not inflate consumption which in turn will lower the demand for black glibber. Where is this going to leave prices?