Shale patch about to lose oil output equivalent to OPEC member

WASHINGTON, D.C. (Bloomberg) -- Oil bulls suffering with the lowest prices since 2003 got a glimmer of hope as the government said the U.S. shale patch will lose as much output as an OPEC member. Unfortunately, it’s one of the small ones.

Volume from the seven major shale regions in the U.S. will drop by 116,000 bopd in February, contributing to a drop of about 640,000 bopd since the end of last March, according to the U.S. Energy Information Administration. That’s more oil than either Ecuador or Libya produced last year on average.

“We’re really starting to hit the steepest part of the decline curve,” said Christopher Kopczynski, a senior analyst for Wood Mackenzie Ltd. in Houston. “There’s a lot more that the U.S. will contribute to bringing barrels off the market.”

Shale production has dropped as crude prices collapsed amid a global supply glut, causing drilling companies to idle 64% of the oil rigs that were in service a year ago. West Texas Intermediate crude, the U.S. benchmark, fell $1.75 to $31.41 Monday on the New York Mercantile Exchange, the lowest settlement since Dec. 5, 2003.

The biggest projected decline is in the Eagle Ford in south Texas, where output is expected to drop 72,000 bopd to 1.15 MMbopd, according to the EIA. The Bakken in North Dakota will lose 24,000 bopd to 1.1 MMbopd. The Permian basin in west Texas will boost production to 2.04 MMbopd.

Kopczynski said U.S. production will fall by another 500,000 bopd as output from existing wells declines and fewer new wells come online to replace it. The biggest declines happen soon after a well is tapped, though, so by the end of this summer the production curve should flatten out, and the U.S. could begin to increase production in 2017 even with a low rig count, he said.