U.S. shale oil production has dropped since mid-March, with energy demand hit by the coronavirus pandemic and domestic producers potentially cutting this year’s capital expenditures by around half, leading to expectations that output may not fully recover for years, MarketWatch.com reported. David Grumhaus, co-CIO at Duff & Phelps Investment Management estimates that U.S. onshore oil production has fallen by roughly 20 percent, or 2 million barrels per day since March, and is unlikely to see a big rebound “in the near or medium term.” Shale operators are facing a mountain of debt that comes due soon, according to Rene Santos, manager of North America supply, analytics at S&P Global Platts. Around 24 oil companies have also filed for Chapter 11 bankruptcy so far this year and the count is “likely to continue to increase.” U.S. horizontal oil rigs, those that drill shale wells, have declined by 75% since mid-March and the “short-term outlook is negative,” says Santos. Even if WTI oil climbs back to pre-COVID-19 levels of around $50 and operators start to increase rigs at that level, he says that would not change the shale oil outlook, as prices would need to see months of “stable higher prices,” and production would take months to react. Domestic shale production may recover somewhat in the next couple of months then decline again, pulling U.S. shale oil output down to 6.1 million barrels per day by year-end 2021, a 27 percent drop from March 2020, according to Santos.
