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US tight oil productionThe second “supply wild card” is US tight oil, specifically in three major basins: the Permian, Bakken, and Eagle Ford. The EIA’s latest monthly crude production data shows, despite the continued decline in prices, Permian basin production continued to grow.12 According to the EIA, average production for 2015 through November was 1.9 million b/d, a 272 thousand b/d increase over 2014 production. Hedging contracts and efficiency gains by large players in the Permian are largely responsible for the production growth, which is expected to continue in 2016. Based on the current trajectory, we estimate Permian crude production to average nearly 2.1 million b/d in 2016.The Bakken on the other hand has experienced steadily declining production month over month from its peak in June 2015 of 1.24 million b/d. Based on EIA’s actual production data through November 2015, production has dropped by 64 thousand b/d.13 The EIA’s January 2016 Drilling Productivity Report (DPR)14 is forecasted Bakken production to reach 1.1 million b/d by March 2016. Deloitte MarketPoint projects average 2016 production will only be 1 million b/d. But given the level of CAPEX cuts and decline rates, this could be conservative.The Eagle Ford has seen the most drastic production impact of the three major basins. Production peaked in March 2015 at 1.7 million b/d and had dropped 287 thousand b/d by November 2015. The EIA expects the decline to continue and forecasts production to reach only 1.22 million b/d by February 2016.15 Deloitte MarketPoint estimates Eagle Ford production will average 1.0 million b/d in 2016.In total, Deloitte MarketPoint estimates US tight oil production in 2016 will decline by around 700 thousand b/d. As for the rest of the US, we expect fairly flat production growth year-over-year as gains in offshore production are mostly offset by conventional onshore declines. This puts Deloitte MarketPoint’s US crude production at around 8.7 million b/d, which is roughly in line with the EIA’s February 2016 Short Term Energy Outlook.
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