Oil Prices Boosted as US Shale Output Shows Signs of Slowing

- September 15th, 2015

The US Energy Information Administration expects production from several shale oil fields to fall by 80,000 barrels per day by next month.

Oil prices gained Tuesday on signs of US production cuts and gains on Wall Street. NYMEX light crude for October delivery rose 1.2 percent, or $0.51, to $44.51 per barrel, while Brent crude on the ICE Futures Europe increased 0.1 percent, to $46.42 per barrel.
The US Energy Information Administration expects production from several shale oil fields to fall by 80,000 barrels per day in October. Output from the Eagle Ford shale in Texas has already dropped 17 percent over seven months, which Simmons & Co. International said “is very surprising” in a research note Tuesday.
Similarly, a preliminary Reuters poll shows that US crude stockpiles likely remained flat last week after four consecutive weeks of gains.


This slowdown from US shale producers has long been anticipated, with market participants hoping lower output will help prices recover and allow the market to rebalance. However, lower output alone won’t be enough to help oil prices recover. This week, investors will also be watching the US Federal Reserve, which is set to conclude a two-day meeting on Thursday.
“The rise in oil prices is inevitable unless something drastic happens, and the recovery could even come this week if the US Federal Reserve decides not to increase interest rates,” Michael Nielsen, a senior oil derivatives trader at Global Risk Management, told The Wall Street Journal.

Company news

Blackbird Energy (TSXV:BBI) continues to advance its Elmworth Montney project in Alberta despite the difficult market. On Monday, the company provided an update on Elmworth, noting that among other things, it has made significant progress regarding infrastructure. Furthermore, it has received a drilling licence for its third well and will now begin a previously announced 2015 drill program there. As of 3:00 p.m. EST on Tuesday, Blackbird’s share price was up 17.24 percent, trading at $0.17. Year-to-date the company is down 15 percent.
Penn West Petroleum (TSX:PWT,NYSE:PWE), an oil and gas producer also focused on Alberta, announced the sale of its Mitsue properties for cash consideration of $192.5 million as part of its non-core asset disposition program. Upon completion of this sale, the company will have raised about $605 million in total proceeds this year. What’s more, since the end of Q2 2013, Penn West has divested an estimated 34,000 barrels of oil equivalent per day of non-core assets for proceeds of $1.7 billion, allowing a debt reduction of $1.4 billion. By 3:30 p.m. EST Tuesday, Penn West’s share price was up 6.06 percent at $0.70. Year-to-date the company is down 71.19 percent.


 
Securities Disclosure: I, Kristen Moran, hold no direct investment interest in any company mentioned in this article.
Related reading:
Oil and Gas Price Outlook for Q4 2015
WCS Discount Dips as US Demand for Alberta Crude Oil Increases
Oil Prices Dip Below $40 per Barrel

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