US shale oil production could drop 9 percent next year as a crude price below US$50 a barrel “slams brakes” on years of supply growth, the International Energy Agency IEA said.
“Oil’s downward spiral to fresh six-year lows below US$50 a barrel has dimmed the prospects for a recovery in US drilling activity,” the Paris-based IEA yesterday said in its monthly market report.
“Unless oil prices bounce back in coming months, supply is forecast to fall by 385,000 barrels per day next year to 3.9 million barrels a day,” IEA said.
The forecast is a turnaround for the IEA, which only two months ago predicted US shale oil output would increase by 60,000 barrels per day next year.
Oil supply from producers outside OPEC are likely to make the biggest contraction next year since 1992 as Saudi Arabia’s strategy to defend market share by pressuring rivals with lower prices takes effect, according to the report.
Drilling activity and output levels are unlikely to rebound following the cuts in oil producers’ capital spending, the agency said.
The number of oil rigs active in the US has fallen by almost 60 percent over the past year, standing at 662 in the week to Sept. 4, according to Baker Hughes Inc.
This has translated into five weeks of decline in US production, the longest retreat in almost 11 years. Output currently stands at 9.13 million barrels per day, a 5 percent drop from the all-time high of 9.61 million reached on June 5, according to US Department of Energy data.
Continuous investment is needed for production to keep flowing from US shale oil wells, which have “steep decline rates,” the IEA said.
Output per well tends to decline by an average of 72 percent from initial production rates within 12 months of the well having started, forcing operators to keep drilling to offset the decline.
Drilling and completion of wells is to drop by a further 20 percent to 70 percent next year, the IEA predicted.
“Impressive increases in productivity” have helped offset the slowdown in drilling and tempered ensuing drop in production, it said.
US shale oil producers would also be the first ones to respond should market conditions improve, the IEA said.
However, the global surplus of oil is even bigger than Goldman Sachs Group Inc thought and that could drive prices as low as US$20 per barrel.
While it is not the base-case scenario, a failure to reduce production fast enough might require prices near that level to clear the oversupply, Goldman said in a report yesterday.
The bank cut its forecast for Brent and WTI crude through next year on the expectation that the glut could persist on OPEC production growth, resilient non-OPEC supply and slowing demand expansion.
“The oil market is even more oversupplied than we had expected and we now forecast this surplus to persist next year,” Goldman analysts, including Damien Courvalin, wrote in the report.
“We continue to view US shale as the likely near-term source of supply adjustment,” analysts said.
Goldman trimmed its estimate for next year’s West Texas Intermediate (WTI) to US$45 per barrel from a May projection of US$57. The bank also reduced next year’s Brent crude prediction to US$49.50 per barrel from US$62.
WTI for next month’s delivery fell as much as US$0.45, or 1 percent, to US$45.47 per barrel on the New York Mercantile Exchange and is heading for a weekly decline. Prices are down 14 percent this year. Brent for next month’s settlement is 1.7 percent lower this week.
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has appointed Rose Castanares, executive vice president of TSMC Arizona, as president of the subsidiary, which is responsible for carrying out massive investments by the Taiwanese tech giant in the US state, the company said in a statement yesterday. Castanares will succeed Brian Harrison as president of the Arizona subsidiary on Oct. 1 after the incumbent president steps down from the position with a transfer to the Arizona CEO office to serve as an advisor to TSMC Arizona’s chairman, the statement said. According to TSMC, Harrison is scheduled to retire on Dec. 31. Castanares joined TSMC in
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the