U.S. Oil Production Hit a Record in March

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Amid concerns of a slowdown in shale oil production, federal data show total U.S. crude production rose by nearly 250,000 barrels per day in March to reach a record high.

Led by production from shale basins in the Lower 48 states, the United States is the world leader in output of natural gas and crude oil. A production boom in the early 2000s prompted an end to a ban on crude oil exports in 2015, a ban that existed since the Arab oil embargo in the 1970s.

Drillers are now doing more with less by tapping miles-long laterals and using multi-bore wells, improving overall efficiencies. In a monthly report published Friday on petroleum, the U.S. Energy Information Administration (EIA), the data arm of the U.S. Department of Energy, found that total crude oil production increased by 250,000 barrels per day (BBL/d) from February to March to reach 13.5 million BBL/d, a record high.

Onshore crude oil production in the Lower 48 states has more than tripled since 2010, driven by growth in the Permian region. Total Lower 48 crude oil production in 2016, a year after the export ban was lifted, averaged 8.7 million BBL/d. Today, the Permian alone is producing close to 6 million BBL/d.

EIA, meanwhile, expects total U.S. crude oil production to average 13.42 million BBL/d and climb to 13.49 BBL/d on average next year. That incremental gain is cause for concern for some in the industry of a plateau for the United States.

Vicki Hollub, the chief executive officer, director and president of Occidental Petroleum Corporation (NYSE:OXY) (Houston, Texas), said in a conference call on first-quarter earnings that Permian production may plateau sooner than expected.

"It's looking like with the current headwinds or at least volatility and uncertainty around pricing in the economy and recessions and all of that, it's looking like that peak could come sooner," she said in March. "So I'm thinking right now the Permian is, if it grows at all through the rest of the year, it's going to be very little."

In the Bakken shale formation in North Dakota, Nathan Anderson, the head of the state Department of Mineral Resources, said there have been roughly four or five different operators that have indicated that lower oil prices may be limiting future activity.

Uncertainty stemming largely from U.S. President Donald Trump's trade policies, where he's threatened steep tariffs for months, only to reverse course and complicate supply-chain logistics formulated from his original agenda, has taken a toll on the global economy, equities and commodity prices.

On Monday, crude oil prices were rallying amid signs of a breakthrough in peace negotiations between Russia and Ukraine, though they remain below the point at which many U.S. drillers can make a profit.

Elsewhere, the gas-to-oil ratio in shale formations is changing as they mature. That ratio increases as pressure declines in the reservoir due to production. As the pressure drops, heavier hydrocarbons get trapped in subsurface pores, allowing room for lighter products such as natural gas to move into the production well.

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