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Page added on February 21, 2020

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Have We Passed ‘Peak Growth’ For Tight Oil?

Production

Has U.S. oil production growth hit the buffers? Supply has boomed over the last decade, disrupting the market, domestically and internationally. But weak commodity markets and corporate strategies are now taking their toll, undermining the expected growth path in the near term. I spoke with our North American market expert, John Coleman, principal analyst, crude supply and infrastructure, to get his perspective.

The big question is: have we passed “peak growth” for U.S. tight oil? Our forecasts suggest we have. And pipeline developers (and their financiers) who’ve done so well out of the boom are increasingly concerned about it.

Permian crude supply growth, the main driver of tight oil growth, has outpaced takeaway capacity frequently in the last few years. When production jumped by an astonishing 1.7 million barrels per day (b/d) in the two years from January 2018 to December 2019, infrastructure was stretched to the limit. Producers had to fight to get their crude to market. Those without access to pipe had to put crude onto rail or trucks or leave it in the ground. And they paid a high price – the U.S.$10 to U.S.$20/bbl discount at the Midland trading hub only a year ago reflected the cost of shipping the marginal barrel to Houston.

Today In: Business

Producers losing out on value while midstream asset owners made hay was a constant narrative in tight oil’s first decade. But things have changed. The playing field has tilted decisively in the other direction at the very start of the 2020s. Overbuild means pipeline owners face intense competition for increasingly scarce barrels.

Permian production growth is decelerating rapidly. Independent producers, constrained by capital discipline, have cut drilling rigs and are shifting focus from growth to generating free cash flow. That will progressively show through in production. We expect Permian tight oil production to increase by just 0.6 million b/d from January 2020 to December 2021 – a fraction of what we saw in the two prior years.

Meanwhile, new pipe is belatedly coming onstream, and at a much faster rate than supply. Capacity already exceeds today’s production of 4.7 million b/d and will reach 7 million b/d by the end of this year. Utilization rates are down from over 100% a year ago to 85% and fall as low as 68% by mid-2021 in our forecasts. Discounts at Midland have unwound to just US$1/bbl. The value has swung back in favour of producers rather than pipe owners.

The tougher financial climate has forced pipeline developers themselves to embrace capital discipline. We’re seeing strategies shift away from new build to focus on project consolidation and cash generation. These companies intend to reduce financial leverage and return any surplus capital to shareholders.

One big question for them is when the 2.3 million b/d of spare Permian pipeline capacity will be filled. It will take some years. At WoodMac we think Permian supply growth starts picking up again in 2022, and that we could be back at high utilisation rates by 2025. There’s plenty of tight oil inventory. How quickly it’s developed depends on price and whether corporate strategies shift back to growth. But there’s a possibility the Permian may never need another new pipeline built.

Our oil market expert, Ann-Louise Hittle, points out that there are also big implications for global oil markets. OPEC+ has its work cut out to balance the market in 2020. Demand is weakening – early in February we revised down first quarter demand by 0.9 million b/d, and calendar 2020 by 0.5 million b/d, mostly due to the effects on the global economy of coronavirus, especially in China. We expect full year demand growth of about 1 million b/d.

Non-OPEC liquids supply is set to grow at more than twice that rate, by around 2.4 million b/d, much the same as it has for the last two years. What’s different in 2020 is that growth is split evenly between the US and other non-OPEC producers including Norway, Canada and Brazil.

OPEC+ has a full ministerial meeting scheduled for 5-6 March. As it weighs up how much more production to cut – if any – it will find that for the first time in several years, US tight oil growth is not the biggest of the problems it’s facing.

Wood Mackenzie



63 Comments on "Have We Passed ‘Peak Growth’ For Tight Oil?"

  1. Sissyfuss on Fri, 21st Feb 2020 8:59 pm 

    The essence of capitalism, over build, over harvest, over consume, and go overboard. Chasing profit while the house is on fire. We’ve overshot the carrying capacity and the solution is not more financialization but fewer humans. Seems not many volunteers to fill the need to cull. Gaia will have to do it herself.

  2. makati1 on Fri, 21st Feb 2020 10:49 pm 

    Sissyfuss, I see that becoming more and more in the news as plagues roam the world. There are currently a number of flu/virus’ loose, not to mention the plague of locusts in the ME and Africa. Then there is the erratic weather in many parts of the world and an increase in earthquakes in new places. We are in for a very exciting/interesting decade, I think. When it is over, we will all be living in a very different world than today. Buckle up!

  3. supremacist muzzies jerk on Fri, 21st Feb 2020 11:38 pm 

    i’m bakc frommy perm vacation
    why whitey supertad battling over the fence then accurse (((supertards))) battling over the fence? battling over the fence is a muzzie thing that’s why whiteys supertard lvoe muzzies?

    friendships via companionship in journey (battling over the fence). don’t be fooled. muzzie scorpion will sting via instinct (1400 years of breeding like dogs breeds) and “Reliance of The Traveller” doctrine

    why it has to be hard core al the time? i hate hard core.

    stop hard core

    amputate all muzzies. there’s no extremist muzies there’s only muzzies – muzzie erdogan (not me btw). the web is rich source of muzzie doctrine, be less ignorant

    love of muzzies is ignorance

  4. joe on Sat, 22nd Feb 2020 1:27 pm 

    When interest rates start going back up, tight oil access to cheap money will end. Tight oil will end, it’s part of the bumpy plateau we have been in since 2005 when peak oil began and prices started to go nuts

  5. FuelShortageComing on Sat, 22nd Feb 2020 2:39 pm 

    Water Memory (2014 Documentary about Nobel Prize laureate Luc Montagnier)

    https://www.youtube.com/watch?v=R8VyUsVOic0

    The manufacturing nodes of the world are now freezing up because of the Corona virus. The Asians manufacturing nodes : South Korean, China and Japan are about to go in limp mode because of the virus. If these three Asians nodes stop, it is over for all of us. Look like the GODS want the end of globalism.

    This really looks like the works of the GODS. Look like the GODS use water memory to make their own modifications to the Corana Virus.

    Globalist have destroyed Western civilization by pushing mass migration in the hope to create more growth, wealth and acquired more power. The China man is now infecting the world with Corona Virus throughout mass migration. I am laughing so hard, sweet justice it is for all of us that were against mass migration.

  6. supremacist muzzies jerk on Sat, 22nd Feb 2020 5:40 pm 

    muhamad the pedifile inshalalah
    make pr0m sx with 9 women one night
    he’s famous porn star

    suleiman had sex with 90 muzzie women inshallah but he didn’t say insallah

    muhammad is the pedifile insallah

  7. supremacist muzzies jerk on Sat, 22nd Feb 2020 5:40 pm 

    ht whitey supertrad david wood insallah

  8. Davy on Sun, 23rd Feb 2020 5:34 am 

    I thought that ‘tight oil’ was K-Y Jelly.

    At least that is what me and the goats think…

  9. JuanP is stupid on Sun, 23rd Feb 2020 5:50 am 

    This is from stupid

    Davy said I thought that ‘tight oil’ was K-Y Jelly. At least…

    Davy said I thought that ‘tight oil’ was K-Y Jel…

    DonaldTrump said Cloggie may I ask how may litres of diesel are nee…

    Davy said JuanP is me makato. dumbass

  10. JuanP on Sun, 23rd Feb 2020 6:44 am 

    I am so so depressed with suicidal thoughts please leave me alone so I can lay in the fetal position all day. There will be little sock puppeteer today or Davy ID theft.

  11. makati1 on Sun, 23rd Feb 2020 6:45 am 

    Juan, I feel beaten and depressed too. My age group has a 15% mortality from this virus. I know it is set to explode in this overpopulated country.

  12. Davy on Sun, 23rd Feb 2020 11:32 am 

    Guys, I feel beaten and depressed too. You all keep calling out my bullying, hyprocisy, and ID theft, and socking on a daily basis for what it is. How can I keep claiming I’m neutering you dumbasses when it is in fact, the other way around.

  13. JuanP on Sun, 23rd Feb 2020 12:05 pm 

    The above is not Davy. I know because that is stuff I do

  14. JuanP on Sun, 23rd Feb 2020 12:12 pm 

    Chinese Scientists Find Coronavirus Did Not Originate In Wuhan Seafood Market

    It is also worth noting that at the same time that even China was questioning the official narrative, the NY Post published an article which sound vaguely familiar: “Don’t buy China’s story: The coronavirus may have leaked from a lab” in which the author writes “the evidence points to SARS-CoV-2 research being carried out at the Wuhan Institute of Virology. The virus may have been carried out of the lab by an infected worker or crossed over into humans when they unknowingly dined on a lab animal. Whatever the vector, Beijing authorities are now clearly scrambling to correct the serious problems with the way their labs handle deadly pathogens.” The conclusion: “China has unleashed a plague on its own people. It’s too early to say how many in China and other countries will ultimately die for the failures of their country’s state-run microbiology labs, but the human cost will be high.” While that conclusion is most likely accurate, the question now is who gets the blame, and why the sudden change in the official Chinese narrative. If, indeed, it is now Xi Jinping’s intention to shift attention away from Beijing’s disastrous handling of the pandemic and pin the blame on someone else, there is only one entity that he can choose: the Level 4 microbiology lab that is equipped to handle deadly coronaviruses, called the National Biosafety Laboratory, which – as we first pointed out several weeks ago – is part of the Wuhan Institute of Virology.

  15. More Lunatic Troll Davy ID Fraud on Sun, 23rd Feb 2020 2:38 pm 

    JuanP is stupid on Sun, 23rd Feb 2020 5:50 am

    JuanP on Sun, 23rd Feb 2020 6:44 am

    makati1 on Sun, 23rd Feb 2020 6:45 am

    JuanP on Sun, 23rd Feb 2020 12:05 pm

    JuanP on Sun, 23rd Feb 2020 12:12 pm

  16. JuanPee is a liar and thief on Sun, 23rd Feb 2020 3:00 pm 

    More Lunatic Troll Davy ID Fraud said JuanP is stupid on Sun, 23rd Feb 2020 5:50 am Jua…

  17. Davy is a retard and liar on Sun, 23rd Feb 2020 3:22 pm 

    He really is

  18. supremacist muzzies jerk on Sun, 23rd Feb 2020 3:48 pm 

    sad news
    whitey supertard philip haney is dead
    “suicide”

    love for supremacist muzzies increae 1000x

  19. fwsmj on Sun, 23rd Feb 2020 4:04 pm 

    duterte breaking off all contacts with america
    white meat aprodisiac next
    supertard makako is nervous

  20. Davy on Sun, 23rd Feb 2020 4:08 pm 

    “It Will Be Really, Really Bad”: China Faces Financial Armageddon With 85% Of Businesses Set To Run Out Of Cash In 3 Months”
    https://tinyurl.com/u7z45fv zero hedge

    “China is now fighting against time to reboot its economy, and the longer the paralysis continues, the more dire the outcome for both China’s banks and local companies. And since it is no longer just “scaremongering” by “conspiracy blogs”, but rather conventional wisdom that China may implode, here is a summary of how the narrative that “it will all be over by mid-March” is dramatically changing. Let’s start with Chinese businesses: while China’s giant state-owned SOEs will likely have enough of a liquidity lifeblood to last them for 2-3 quarters, it is the country’s small businesses that are facing a head on collision with an iceberg, because according to the Nikkei, over 85% of small businesses – which employ 80% of China’s population – expect to run out of cash within three months, and a third expect the cash to be all gone within a month. Should this happen, not only will China’s economy collapse, but China’s $40 trillion financial system will disintegrate, as it is suddenly flooded with trillions in bad loans…local governments around the country face a daunting question of whether to focus on staving off the virus or encourage factory reopenings, as the following tweet perfectly captures…Hence the most diabolic Catch 22 for China’s social and economic system, because whereas until now China could easily lie its way out of any problem, in this case lying will only make the underlying (viral pandemic) problem worse as sick people return to work, only to infect even more co-workers, forcing even more businesses to be quarantined.”

  21. makati1 on Sun, 23rd Feb 2020 4:47 pm 

    If you think it will ONLY affect China’s economy, you need a lesson in globalization Davy. The pain is coming to Amerika and will probably sink the good ship SS Debt. We can only hope.

  22. Davy on Sun, 23rd Feb 2020 4:49 pm 

    “The US Is World Leader In Bio-Weapons Research, Production, & Use Against Mankind”
    https://tinyurl.com/v5fx94e zero hedge

    “Given the history of the United States government and its military industrial complex concerning biological and germ warfare, the use of these agents against large populations, and the desire to create agents that are race specific strains, these powerful entities have become compassionless purveyors of death to the innocent. Manmade viruses meant for warfare, whether for economic destruction, starvation, or mass death, are the workings of the truly evil among us. Predation at this level is relegated to those in power; a president for example, could give the order to wipe out millions due to his inability to control a problem he caused and perpetuated, and then lay blame on the victims. The new Coronavirus, Covid-19, is one in a line of many that were not just likely but most certainly produced by man in laboratories, is affecting almost exclusively the Chinese at this point. This has seemingly opened the floodgates to speculation as to its exact origin. This virus has unique characteristics that have happened before with SARS and MERS, and has genetic material that has never been identified, and is not tied to any animal or human known virus. This should be troubling to all, because if this is manmade, it was manufactured as a weapon of war. So who is responsible for its release in China? It is possible that this virus was created in China and was “accidentally” released into the population, but that does not sound credible at any level. Do any think that the Chinese government would create a Chinese race specific virus and release it in their country? The drive to find biological weapons that will sicken and kill millions at a time is not only a travesty, but is beyond evil. This power is held by the few, but the potential victims of this madness include everyone on earth. How can such insanity at this level be allowed to continue? If any issue could ever unite the masses, governments participating in biological and germ warfare, race-specific killing, and creating viruses with the potential to affect disease and death worldwide, should cause many to stand together against it. The first step is to expose that governments, the most likely culprit being the U.S. government, are planting these viruses purposely to cause great harm. Once that is proven, the unbelievable risk to all will be known, and then people everywhere should put their divisiveness aside, stand together, and stop this assault on mankind.“

  23. makati1 on Sun, 23rd Feb 2020 5:00 pm 

    fwsmj, showing your ignorance again? Du30 has no problems with Amerikans. There are over 100,000 of us living here, not counting millions of Filipino Amerikans. We don’t cause trouble and bring billions of dollars into the Philippine economy.

    He has a problem with the way the US military is trying to pick a fight with one of the Philippines closest neighbors and biggest investors, China. Not to mention that Amerikan soldiers are not very adult and rape and molest Flipinas frequently and then are transferred out of the country to keep them from a Philippine jail. Amerikans act like immature children and must be banished.

    I’m sure the Russians would be happy to replace the Amerikans in the fight to clean up the “terrorists” here. I would welcome that.

    BTW: No new coronavirus cases here. No so in Amerika.

  24. JuanP on Sun, 23rd Feb 2020 5:39 pm 

    The US Is World Leader In Bio-Weapons Research, Production, & Use Against Mankind

    https://tinyurl.com/v5fx94e zero hedge

    “Given the history of the United States government and its military industrial complex concerning biological and germ warfare, the use of these agents against large populations, and the desire to create agents that are race specific strains, these powerful entities have become compassionless purveyors of death to the innocent. Manmade viruses meant for warfare, whether for economic destruction, starvation, or mass death, are the workings of the truly evil among us. Predation at this level is relegated to those in power; a president for example, could give the order to wipe out millions due to his inability to control a problem he caused and perpetuated, and then lay blame on the victims. The new Coronavirus, Covid-19, is one in a line of many that were not just likely but most certainly produced by man in laboratories, is affecting almost exclusively the Chinese at this point. This has seemingly opened the floodgates to speculation as to its exact origin. This virus has unique characteristics that have happened before with SARS and MERS, and has genetic material that has never been identified, and is not tied to any animal or human known virus. This should be troubling to all, because if this is manmade, it was manufactured as a weapon of war. So who is responsible for its release in China? It is possible that this virus was created in China and was “accidentally” released into the population, but that does not sound credible at any level. Do any think that the Chinese government would create a Chinese race specific virus and release it in their country? The drive to find biological weapons that will sicken and kill millions at a time is not only a travesty, but is beyond evil. This power is held by the few, but the potential victims of this madness include everyone on earth. How can such insanity at this level be allowed to continue? If any issue could ever unite the masses, governments participating in biological and germ warfare, race-specific killing, and creating viruses with the potential to affect disease and death worldwide, should cause many to stand together against it. The first step is to expose that governments, the most likely culprit being the U.S. government, are planting these viruses purposely to cause great harm. Once that is proven, the unbelievable risk to all will be known, and then people everywhere should put their divisiveness aside, stand together, and stop this assault on mankind.“

  25. JuanP on Sun, 23rd Feb 2020 5:42 pm 

    “fwsmj, showing your ignorance again?”

    Hey, Mak, fwsmj is me. I thought you liked me.

  26. JuanP on Sun, 23rd Feb 2020 5:48 pm 

    “If you think it will ONLY affect China’s economy, you need a lesson in globalization Davy.”

    Mak, come on nobody is saying that. What is so funny is you somehow you think the east is going up and west down. Your lesson in globalization is whats bad for the US will stay in the US but if something bad happens in China then the US get it too. Mak, that is not logical if you claim to understand globalization.

  27. makati1 on Sun, 23rd Feb 2020 5:51 pm 

    I dislike anyone not intelligent, mature enough to think for themselves.

    “duterte breaking off all contacts with america
    white meat aprodisiac next
    supertard makako is nervous”, is not an intelligent statement. It is a poor version of retard English. Not even funny. At least you spelled his name correctly.

  28. More Lunatic Troll Davy ID Fraud on Sun, 23rd Feb 2020 5:54 pm 

    JuanP on Sun, 23rd Feb 2020 5:39 pm

    JuanP on Sun, 23rd Feb 2020 5:41 pm

    JuanP on Sun, 23rd Feb 2020 5:42 pm

    JuanP on Sun, 23rd Feb 2020 5:48 pm

  29. JuanP on Sun, 23rd Feb 2020 5:59 pm 

    What is this? I guess it must be the troll Richard Guenette:

    More Lunatic Troll Davy ID Fraud said JuanP on Sun, 23rd Feb 2020 5:39 pm JuanP on Sun,…

  30. Duncan Idaho on Sun, 23rd Feb 2020 6:00 pm 

    ” In an era of rampant corruption and corporate control in both political parties, Nevada handed a blowout win to Sen. Bernie Sanders (I-Vt.) ― one of two candidates in the race who have sworn off the old pattern of billionaire patronage and instead produced a policy platform designed to make this country work for working people of all colors.”

    “Despite the best efforts of the party’s power brokers and big donors, voters overwhelmingly decided to back a candidate whose agenda calls for a transfer of power away from those elites and into the hands of the people.”

    (I know many on this board cannot read that long—)

  31. makati1 on Sun, 23rd Feb 2020 6:02 pm 

    ‘JuanP’, alias Davy, do you think everyone is as uneducated , immoral and stupid as you? You are a Sinophobe first class, so all of your posts are anti-China/Asia, pro terrorist Amerika. Heil Trump! LOL

    I understand globalization better than you ever will. I live where I have to change my incomes from faux dollars to good Philippine pesos. I travel by means of globalization. I communicate with my friends and family thru globalization. I watch what is happening around the world because I am smart enough to realize that I rely on globalization to have the extras that makes life more enjoyable.

    Amerikans never think or even realize any of that because they are cocooned in a fake economy and fake country. That is changing and fast. The 2X4 of reality is going to hurt when it hits the face of Amerika. This year, by the way it looks. China will survive and move forward. The West, including the US, not likely.

  32. JuanP on Sun, 23rd Feb 2020 6:06 pm 

    Mak, you are a hypocrite who lives by double standards. Everybody know that. I suggest you get out of Asia because you are in the 15% group most in danger of dying from this China virus. Get out Mak before they shut down Manila and you can’t get a flight out.

  33. JuanP on Sun, 23rd Feb 2020 6:08 pm 

    “Despite the best efforts of the party’s power brokers and big donors, voters overwhelmingly decided to back a candidate whose agenda calls for a transfer of power away from those elites and into the hands of the people.”

    ROFLOL, Duncan do you really think Burnie will transfer power to the people?? You are so naive. He will transfer power to his people who will be the new elites. He is a communist and that is what communist do.

  34. More Lunatic Troll Davy ID Fraud on Sun, 23rd Feb 2020 6:09 pm 

    JuanP on Sun, 23rd Feb 2020 5:59 pm

    JuanP on Sun, 23rd Feb 2020 6:06 pm

  35. More Lunatic Troll Davy ID Fraud on Sun, 23rd Feb 2020 6:11 pm 

    JuanP on Sun, 23rd Feb 2020 6:08 pm

  36. JuanP on Sun, 23rd Feb 2020 6:11 pm 

    “More Lunatic Troll Davy ID Fraud said JuanP on Sun, 23rd Feb 2020 5:59 pm JuanP on Sun,…”

    More Richard Guenette trolling. We need to ban that guy!

  37. More From The Lunatic Troll Davy on Sun, 23rd Feb 2020 6:18 pm 

    JuanP on Sun, 23rd Feb 2020 6:11 pm

  38. JuanP on Sun, 23rd Feb 2020 6:21 pm 

    “More From The Lunatic Troll Davy said JuanP on Sun, 23rd Feb 2020 6:11 pm”

    Richard can you leave it alone and let us comment in peace!

  39. JuanP on Sun, 23rd Feb 2020 6:22 pm 

    I am starting to feel some depression creep in. I may have to let up on commenting to get over this anxiety.

  40. More Trolling from the Lunatic Davy on Sun, 23rd Feb 2020 6:26 pm 

    JuanP on Sun, 23rd Feb 2020 6:21 pm

    JuanP on Sun, 23rd Feb 2020 6:22 pm

  41. makati1 on Sun, 23rd Feb 2020 6:43 pm 

    We all know that most of JuanP’s posts are delusional Davy’s. He is a broken record, repeating over and over, the same putdowns and bullshit. The same Rah! Rah! Amerika!, Asia failing, hypocrisy.

    I like it here, Davy. I am safe from the Police State you live in. I have seen no reason to even think my presence here is unsafe. I an accepted as part of the community.

    Your scaremongering will never work. I see reality. You see propaganda and are subject to brainwashing 24/7/365. Delusional Davy, you better flee to that (???) place in Italy you brag about before you get locked into the Amerikan gulag. LMAO!

  42. Duncan Idaho on Sun, 23rd Feb 2020 7:01 pm 

    The Berniegeddon is upon us! It’s France falling to the Nazis in World War II! It’s the Russians! It’s the end of everything! Flee! Flee for your lives!

    (Sorry about that. Just trying out for a talking head guest spot on MSNBC.)

  43. makati1 on Sun, 23rd Feb 2020 7:11 pm 

    Davy, it’s not looking good for your refuge in Italy!

    “Coronavirus outbreak grows in northern Italy, 16 cases reported in one day”
    “10 Italian Towns In Lockdown Over Coronavirus Fears”
    “Italy battles ‘explosion’ of coronavirus cases as third patient dies”
    “Austria stops train from Italy due to suspected coronavirus infections”

    http://ricefarmer.blogspot.com/

  44. Duncan Idaho on Sun, 23rd Feb 2020 7:11 pm 

    Sanders’ spokesman Mike Casca tweeted after the segment that he “never thought part of my job would be pleading with a national news network to stop likening the campaign of a jewish presidential candidate whose family was wiped out by the nazis to the third reich. but here we are.”

  45. Duncan Idaho on Sun, 23rd Feb 2020 7:13 pm 

    http://ricefarmer.blogspot.com/

    A ricefarmer reader–
    I would never of suspected.

  46. makati1 on Sun, 23rd Feb 2020 7:26 pm 

    Ricefarmer has a better spread of world views than ZeroHedge or even GlobalResearch. A quick place to scan many views and subjects. I read 40 to 50 articles a day on current events. I want to be prepared, not blindsided by the future. Most Amerikans have no idea what is happening or what is coming.

  47. Duncan Idaho on Sun, 23rd Feb 2020 7:34 pm 

    Ricefarmer

    I view it often also.

  48. Davy on Sun, 23rd Feb 2020 8:28 pm 

    You guys realize Rice Farmer amalgamates news. LOL. It is not the site it is the vision that one has to amalgamate pieces of the truth. Neither of you have vision but what you do have is reflectors. Instead of seeing you just reflect your agenda. I guess that is better than pure randomness of the mental case JuanPee.

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