Generic Hero BannerGeneric Hero Banner
Latest market news

US shale producers keep tight grip on purse strings

  • Market: Crude oil
  • 21/12/20

Higher oil prices signal a recovery in US oil production next year, but growth will be slow as shale firms keep a tight grip on spending.

Oil prices are rising and cash flow growing in the US shale sector. But producers say they will remain focused on cutting costs and rebuilding corporate balance sheets after sharply reducing spending in response to this year's oil demand and price shock. "Going into 2021, our view of the macro situation is we will still largely be at an oversupplied market next year," EOG Resources chief operating officer Billy Helms says. "So we do not anticipate growing volumes next year until we see the market conditions improve."

Independent shale-focused oil and gas firms cut capital expenditure (capex) to its lowest in over a decade last quarter, the US-based Institute for Energy Economic and Financial Analysis (IEEFA) says. Capital spending was down by 58pc year on year in the quarter for a group of 33 producers tracked by the IEEFA, following a 44pc decline in the second quarter when oil prices slumped. But higher prices in the third quarter and even deeper spending cuts yielded "the strongest cash flow results since the dawn of the fracking boom", the IEEFA says (see graph). Free cash flow — cash generated from operations minus capital investment — measures a company's ability to pay down debt and reward shareholders.

Shale firms have spent more than they earned in the pursuit of faster growth over the past decade and can no longer persuade banks and private equity to finance investment in drilling new wells. Over 250 North American exploration and production firms have filed for bankruptcy since 2015, US law firm Haynes & Boone says. And those that survive now recognise that they must reward shareholders.

Shale firms are expected to keep a tight grip on spending next year, consultancy Rystad Energy says. Third-quarter guidance from 23 oil-focused producers accounting for 41pc of this year's US shale oil production indicates a further 13pc fall in drilling and completion capex in 2021. But Permian operators still expect a 2pc increase in output next year, despite spending cuts, as they continue to drive down their production costs.

Slow recovery

Activity continues to recover slowly in the shale sector this quarter as more wells are drilled and completed. But new-well output still lags legacy declines at existing wells in all seven shale regions covered by the EIA's Drilling Productivity Report (DPR). The EIA expects total oil output in the seven regions to fall by 130,000 b/d month on month in December-January, leaving production 1.6mn b/d lower than a year earlier. New-well output of 320,000 b/d last month was only half of where it was a year ago and 60pc fewer wells were completed. Legacy declines did ease by around a third over the same period owing to lower output and improved well productivity. But companies still need to do more before production increases again.

Oil rig counts rose again this month to levels last recorded in May, service company Baker Hughes says. But present levels are only just over a third of pre-crisis levels in March, while the number of "frac spreads" or completion crews deployed to bring new wells on stream continues to increase faster than rig counts. The frac spread count reached around half pre-crisis levels this month, industry monitor Primary Vision says (see graph). Operators in the seven DPR regions are completing more wells than they are drilling, using up their inventory of "drilled-but-uncompleted" (DUC) wells, because this is cheaper than drilling and completing a new well from scratch. If oil prices continue to gain ground, firms may be tempted to spend a little more next year.

US fracking finances

Oil rigs and frac spreads

Shale oil production drivers

Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
13/03/25

Dangote refinery buys first cargo of Eq Guinea crude

Dangote refinery buys first cargo of Eq Guinea crude

London, 13 March (Argus) — Nigeria's 650,000 b/d Dangote refinery has bought its first cargo of Equatorial Guinea's medium sweet Ceiba crude, according to sources with knowledge of the matter. Dangote bought the 950,000 bl cargo loading over 12-13 April from BP earlier this week, sources told Argus . Price levels of the deal were kept under wraps. Most Ceiba exports typically go to China. Around 18,000 b/d discharged there last year, while three shipments went to Spain and one to the Netherlands, according to Vortexa data. This year, two cargoes loading in February and March are signalling Zhanjiang in China, according to tracking data. Traders note that buying a Ceiba cargo is part of Dangote's efforts to diversify its crude sources. Last month the refinery bought its first cargo of Algeria's light sweet Saharan Blend crude from trading firm Glencore, which is due to be delivered over 15-20 March. Market sources said Dangote seems to have sourced competitively priced crude from Equatorial Guinea at a time when domestic grades are facing sluggish demand from Nigeria's core European market amid ample supply of cheaper Kazakh-origin light sour CPC Blend, US WTI and Mediterranean sweet crudes. Several European refineries are due to undergo maintenance in April, which is also weighing on demand. Nigeria's state-owned NNPC is currently in negotiations with the Dangote refinery about extending a local currency crude sales arrangement , which involves crude prices being set in dollars and Dangote paying the naira equivalent at a discounted exchange rate. Any changes to the terms of the programme may pressure Dangote to increase the amount of foreign crude in its slate. Refinery sources told Argus in January that Dangote will source at least 50pc of its crude needs on the import market and is building eight storage tanks to facilitate this. By Sanjana Shivdas Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Find out more
News

Nigeria's port authority raises import tariffs


13/03/25
News
13/03/25

Nigeria's port authority raises import tariffs

London, 13 March (Argus) — The Nigerian Ports Authority (NPA) has raised tariffs by 15pc on imports "across board", taking effect on 3 March, according to a document shown to Argus . The move comes as the independently-owned 650,000 b/d Dangote refinery continues to capture domestic market share through aggressive price cuts, pushing imported gasoline below market value in the country. Sources said that Dangote cut ex-rack gasoline prices to 805 naira/litre (52¢/l) today, from between 818-833N/l. The rise in NPA tariffs may add on additional cost pressures onto trading houses shipping gasoline to Nigeria, potentially affecting price competitiveness against Dangote products further. The move would increase product and crude cargo import costs, according to market participants. But one shipping source said the impact would be marginal as current costs are "slim", while one west African crude trader noted that the tariffs would amount to a few cents per barrel and represent a minor rise in freight costs. Port dues in Nigeria are currently around 20¢/bl, the trader added. One shipping source expects oil products imports to continue to flow in, because demand is still there. Nigeria's NNPC previously said the country's gasoline demand is on average around 37,800 t/d. Over half of supplies come from imports, the country's downstream regulator NMDPRA said. According to another shipping source, Dangote supplied around 526,000t of gasoline in the country, making up over half of product supplied. The refinery also supplied 113,000t of gasoil — a third of total total volumes in the country — and half of Nigeria's jet at 28,000t. By George Maher-Bonnett and Sanjana Shivdas Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

News

IEA says trade tensions clouding oil demand outlook


13/03/25
News
13/03/25

IEA says trade tensions clouding oil demand outlook

London, 13 March (Argus) — The IEA today downgraded its global oil demand growth forecast for 2025, noting a deterioration in macroeconomic conditions driven by rising trade tensions. It sees a larger supply surplus as a result, which could be greater still depending on Opec+ policy. The Paris-based agency, in its latest Oil Market Report (OMR), sees oil demand rising by 1.03mn b/d to 103.91mn b/d in 2025, down from a projected rise of 1.10mn b/d in its previous OMR. The IEA said recent oil demand data have underwhelmed, and it has cut its growth estimates for the final three months of 2024 and the first three months of this year. US President Donald Trump has imposed tariffs on various goods arriving in the US from China, Mexico and Canada, as well as on all imports of steel and aluminium. Some countries have retaliated with tariffs of their own on US imports, raising the prospect of a full-blown trade war. The IEA said US tariffs on Canada and Mexico "may impact flows and prices from the two countries that accounted for roughly 70pc of US crude oil imports last year." But it is still too early to assess the full effects of these trade policies on the wider oil market given the scope and scale of tariffs remain unclear and that negotiations are continuing, the IEA said. For now, the IEA's latest estimates see US demand growth this year slightly higher than its previous forecast. It sees US consumption increasing by 90,000 b/d to 20.40mn b/d, compared with a projected rise of 70,000 b/d in the prior OMR. The downgrades to its global oil demand forecast were mainly driven by India and South Korea. The agency also noted latest US sanctions on Russia and Iran had yet to "significantly disrupt loadings, even as some buyers have scaled back loadings." The IEA's latest balances show global supply exceeding demand by 600,000 b/d in 2025, compared with 450,000 b/d in its previous forecast. It said the surplus could rise to 1mn b/d if Opec+ members continue to raise production beyond April. Eight members of the Opec+ alliance earlier this month agreed to proceed with a plan to start unwinding 2.2mn b/d of voluntary production cuts over an 18 month period starting in April. The IEA said the actual output increase in April may only be 40,000 b/d, not the 138,000 b/d implied under the Opec+ plan, as most are already exceeding their production targets. The IEA sees global oil supply growing by 1.5mn b/d this year to 104.51mn b/d, compared with projected growth of 1.56mn b/d in its previous report. The agency does not incorporate any further supply increases from Opec+ beyond the planned April rise. The IEA said global observed stocks fell by 40.5mn bl in January, of which 26.1mn bl were products. Preliminary data for February show a rebound in global stocks, lifted by an increase in oil on water, the IEA said. By Aydin Calik Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

News

Opec sticks to demand forecasts despite trade tensions


12/03/25
News
12/03/25

Opec sticks to demand forecasts despite trade tensions

London, 12 March (Argus) — Opec has kept its oil demand growth forecasts unchanged for both 2025 and 2026 on expectations that the global economy will adjust to volatile trade policies. US president Donald Trump has imposed tariffs on various goods arriving in the US from China, Mexico and Canada, as well as on all imports of steel and aluminium. Some countries have retaliated with tariffs of their own on US imports, raising the prospect of a full-blown trade war. But Opec is confident that the global economy can adapt. "Price pressures may weigh on global growth but are unlikely to disrupt overall growth momentum, which remains supported by resilient consumer demand and strong output in major emerging economies," Opec said in its latest Monthly Oil Market Report (MOMR). Opec also said that rising trade among emerging economies could partially offset tariff-related disruptions, but it warned that "downside risks need to be monitored given uncertainties in policy rollout and subsequent effects and impacts". Despite the uncertainty, Opec kept its oil demand forecast for this year and next unchanged for the second month in a row. For this year, the group sees oil demand growing by 1.45mn b/d to 105.2mn b/d, while in 2026 it sees consumption increasing by 1.43mn b/d to 106.63mn b/d. Opec's demand growth forecasts remain somewhat higher than those projected by the IEA and the US' EIA. In terms of supply, the group kept its non-Opec+ liquids growth forecast unchanged at 1mn b/d for both 2025 and 2026, with most of this growth seen coming from the US, Brazil and Canada. Opec+ crude production — including Mexico — rose by 363,000 b/d to 41.011mn b/d in February, according to an average of secondary sources that includes Argus . Opec puts the call on Opec+ crude at 42.6mn b/d in 2025 and 42.9mn b/d in 2026, unchanged from last month. Eight members of the wider Opec+ alliance earlier this month agreed to start increasing crude output from April, citing "healthy market fundamentals and the positive market outlook". By Aydin Calik Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

News

US, Canada to meet Thursday on USMCA


11/03/25
News
11/03/25

US, Canada to meet Thursday on USMCA

Houston, 11 March (Argus) — US and Canadian officials will meet later this week to begin discussing an update to the US-Mexico-Canada (USMCA) free trade agreement. In posts on social media Tuesday afternoon, US secretary of Commerce Howard Lutnick and Ontario premier Doug Ford said they would meet on 13 March "... to discuss a renewed USMCA ahead of the April 2 reciprocal tariff deadline." In response, Ontario has agreed to suspend its 25pc surcharge on exports of electricity to Michigan, New York and Minnesota. Ford and Lutnick talked by phone on Tuesday following US president Donald Trump's threats to double tariffs on Canadian steel and aluminum . Send comments and request more information at feedback@argusmedia.com Copyright © 2025. Argus Media group . All rights reserved.

Generic Hero Banner

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more