(UPI) Weak economics in the energy sector may lead to a general decline in total U.S. crude oil production, a short-term federal market report finds.
The U.S. Energy Information Administration said in its short-term market report total U.S. crude oil production declined by 120,000 barrels per day from August to September. By next year, EIA expects crude oil production to fall from the expected 2015 average of 9.2 million bpd to 8.9 million bpd next year.
“Expected crude oil production declines from May 2015 through mid-2016 are largely attributable to unattractive economic returns in some areas of both emerging and mature onshore oil production regions,” EIA said in its latest report.
Crude oil prices are down about half from this time last year. West Texas Intermediate, the U.S. benchmark for crude oil prices, dropped from the $59.47 per barrel start of July to $46.52 on Oct. 1.
EIA said in its report this drop has led to a reduction in spending and a deferment of major oil projects. Crude oil prices are still high enough to support output in key shale areas like the Bakken reserve in North Dakota and the Eagle Ford basin in Texas.
EIA finds drilling activity, already at historic lows, should be limited as long as WTI stays below $60 per barrel, however.
Crude oil prices are lower in part because of historic growth in U.S. oil production and weaker global demand. Daniel Yergin, vice chairman of energy consultant group IHS, said in emailed comments the increase in production from U.S. shale “was one of the main triggers of the collapse in oil prices since mid-2014.”