Shale Oil

Oil analysts and traders do not expect US shale output to rise in response to the ongoing price rise caused by OPEC+'s decision to roll over current cuts through April and Saudi Arabia's decision to continue 1.000MM b/d in extra voluntary cuts.

Global oil majors, which have previously used the short-cycle flexibility of US shale to their advantage to drive production growth, are now looking to reduce spending in the sector as part of a new strategy to increase free cash flow.

According to data compiled by the Argentine unit of Houston-based services company NCS Multistage, fracking activity in the Vaca Muerta (Spanish for Dead Cow) shale play last month hit its highest-level since Aug. 2019 to 662 frac stages, up 39% from 477 in Dec.

Major US shale firms are expected to maintain capital discipline this year even amid the ongoing recovery in oil demand and prices.

Due to the negative impact of COVID-19 on oil demand and prices, activity in Argentina's Vaca Muerta shale play fell last year, driving down Argentine oil production in the process.

Despite production activity recovering from the depths seen in April 2020, estimates project that US shale output will start 2021 averaging 7.44MM b/d, which will be 20% lower compared to the start of the previous year.

According to the EIA's latest Drilling Productivity Report released on Dec. 14, US shale output in Jan. 2021 will fall by 137K b/d from current-month levels to 7.438MM b/d.

Shale has made up a large portion of the US's total production over the past decade with tight-oil output growing from around 830K b/d in 2010 to 7.75MM b/d in 2019.

A new analysis from BloombergNEF, which puts the breakeven cost in the Delaware Basin shale play in Texas at $33/bbl, down from $40/bbl last year.