An Alarming Trend Is Developing In US Shale Oil Production (Part 3)

Please read Part 1, and Part 2 of this series.

We've been pounding the table all year on what we think is a very alarming trend developing in US shale oil production. For those of you who have not read part 1 or part 2 of this series, I highly encourage you to do so. But if you don't have time, here's the cliff note version:

• US shale oil production growth in 2023 was overstated because EIA understated US oil production in 2022 and overstated production (after June) in 2023. The end result was an overstated growth rate that was then used by sell-side analysts in all of their models (2024 & 2025).

• US oil production is flat y-o-y. The consensus expectation was for US oil production to reach ~13.5 million b/d by year-end.

• Associated gas production from US shale oil basins is now far outpacing crude production growth. This is usually a sign of a maturing basin and the peak in the Permian is not far away.

The trend is becoming clearer with EIA releasing US oil production data for July yesterday. According to the EIA, US crude production for July came in at 13.205 million b/d. While this is a small decrease m-o-m, the real indicator is in the adjustment factor (balancing item), which was -425k b/d.

Relative to our expectations, US crude production severely disappointed our implied production figures for July. How much disappointment? Here are the staggering figures for this year:

• July US crude production:

12.78 million b/d (production vs adjustment) vs 13.264 million b/d (our method)

• Last 3 months:

EIA 914 reported production - 13.199 million b/d

EIA 914 + adjustment - 13.021 million b/d

• Year-to-date (production + adjustment):

2023 same time horizon - 13.136 million b/d

2024 YTD - 13.118 million b/d

HFIR Production Tracker - 13.307 million b/d

Do you notice anything in particular from this trend?