Associated light, tight oil production in the Permian Basin, Eagle Ford Shale and Bakken was the main driver in NGL hitting a record high of 6.4 MMbbl/d in April, according to the International Energy Agency’s (IEA) July Oil Market Report.
U.S. NGL production was so substantial, it ranked as the fourth largest liquids producer globally.
The report says that U.S. tight oil accounted for 780,000 bbl/d of 2023 gains and represented 94% of the growth in U.S. crude. The U.S. NGL production surge drove propane pricing down to a level competitive with petrochemical feedstock ethane.
In the report, persistent macroeconomic headwinds and a deepening manufacturing slump caused the Paris-based IEA to revise its 2023 growth estimate for the first time this year. Global oil demand is now expected to climb 2.2 MMbbl/d to a new record of 102.1 MMbbl/d.
World oil supply rose to 101.8 MMbbl/d, but is expected to fall sharply this month because of Saudi Arabia’s cuts of 1 MMbbl/d. Non-OPEC+ oil production is expected to fall by 100,000 bbl/d in the second half of 2023, even as the U.S. will contribute 1.2 MMbbl/d to growth — more than 60% of the non-OPEC+ gains, the report says.
U.S. production to decline
The U.S. and Canadian output—and seasonally higher biofuels production—pushed non-OPEC+ supply to 50 MMbbl/d in June, according to the report. Despite its share of non-OPEC+ supply, the report predicts U.S. output will slow “dramatically.” IEA based its findings on data from the Federal Reserve Bank of Dallas.
Garrett Golding, a senior business economist at the Dallas Fed, said IEA, the U.S. Energy Information Agency and the broader market are starting to realize that despite increased U.S. production, the second half of 2023 will likely see production declines.
“With the slower annual pace there could be some months here that may surprise us [with] declines that we haven’t really had to deal with for a few years now,” Golding said, explaining that the increase was from higher drilling activity in the middle of 2022—and that is slowing now.
He said the IEA report touched on an important point: well costs have come down, but commodity prices have come down, too. Golding added that the once hefty supply of more than 1,000 DUCs is down to about 200 or less.
“Some of those wells are actually quite old, and some of them might never get completed,” he said. “So, that DUC inventory is effectively zero.”
China continues to be the biggest driver of global oil demand. The report says the country will account for 70% of the increase in global demand, largely because of its petrochemical use.
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