Energy Prospectus

The big story this month is one of tightening supply, with the spotlight firmly fixed on non-OPEC. Oil's price collapse is closing down high-cost production from Eagle Ford in Texas to Russia and the North Sea, which may result in the loss next year of half a million barrels a day - the biggest decline in 24 years. While oil's recent volatility has been unnerving - Brent crude jolted from a six-year low below $43 /bbl to above $50/bbl in the space of days - the lower price environment is forcing the market to behave as it should by shutting in output and coaxing demand.

US oil production is likely to bear the brunt of an oil price decline that has already wiped half the value off Brent. After expanding by a record 1.7 mb/d in 2014, the latest price rout could stop US growth in its tracks. A sharp decline is already underway, with annual gains shrinking from more than 1 mb/d at the start of 2015 to roughly half that level by July. Rigorous analysis of our data suggests that US light tight oil supply, the engine of US production growth, could sink by nearly 400 kb/d next year as oil's rout extends a slump in drilling and completion rates.

Read: https://www.iea.org/oilmarketreport/omrpublic/

FWIW: I think U.S. onshore crude oil production will drop by AT LEAST 500,000 barrels per day between now and year-end. This is a result of a BIG DROP in well completions.

IEA now saying we could see an oil shortage within twelve months:

Direct quote from today's Oil Market Report: "Producers outside of the US also continue to adjust to the lower price outlook. Marginal fields are being shut or are at risk as companies seek to stem losses from high operating costs. Spending curbs are also accelerating decline rates. The sizeable anticipated loss of overall non-OPEC output and robust demand growth suggest that unless prices recover, lower-cost OPEC producers would need to turn up the taps during the second half of 2016 to keep the market in balance. Our forecast shows the 'call' on OPEC for 2H16 leaping to an average 32 mb/d - a level last pumped seven years ago. The group produced 31.6 mb/d during August."