The US shale oil industry is awaiting major challenges in the coming period, although the United States has managed to rebalance relatively to the domestic market after record production cuts.

In a report published by the American "Oil Price" website, the author Nick Cunningham said that the latest data issued by the US Energy Information Administration reveals that production decreased dramatically during the last period, and reached 600 thousand barrels per day during the week ending June 12 , A decrease of more than 2.6 million barrels per day compared to the level of production that was recorded in mid-March last.

Reuters figures indicate that production levels began to rise gradually after the waves of closings in the last period, as it was decided to allow the resumption of production of 500 thousand barrels per day by the end of last June.

The US Energy Information Administration data also indicate that crude inventories and distillate products in the United States decreased, while gasoline stocks increased, and crude inventories fell 7.2 million barrels last week, to 533.5 million barrels.

Oil production levels started to rise gradually after the closing waves (Reuters)

Shale recovery stages

The writer explains that the recovery of the shale oil industry in the United States still requires a lot of time, which is what the opinions of specialized institutions differ on.

According to Morgan Stanley, the US shale oil industry will go through 3 phases before recovering from the current crisis.

The first stage is the return of closed wells to work, and the second stage is the stage of stabilizing production levels, and successful completion requires that oil prices reach an average of $ 40 a barrel, and the third stage is the stage of production growth, provided that prices reach the level of $ 50 a barrel.

But Morgan Stanley warned that "there are no real opportunities for American production to grow this year or the next."

According to the bank’s expectations, the shale oil industry needs about two years for WTI average to be $ 50, and production returns to the levels that preceded the Corona pandemic.

As for the GBC Energy Energy Group, it expects the current situation to continue until next November, before the American shale oil industry witnesses a rapid recovery, and then production levels within one year will return to what they were before the pandemic.

But the GBC group also takes into account the worst-case scenario, which is that things do not improve as quickly as required. According to this scenario, the shale oil industry may not regain its production levels until September 2023.

As Standard Chartered Bank said in a report issued on June 16, "We believe that the oil market does not currently offer prices that take into account the possibility of a second wave of new cases of coronavirus infection, and the consequent closures, or any other possibilities of non-return to economic activity." To his nature at the expected speed. "

The collapse of American companies

Outside of future expectations, many American oil companies are currently sinking in debt due to the fluctuations that occurred over the past period.

Just a few days ago, the Extra Oil & Gas Company (a large Colorado-based company) declared bankruptcy, and Chesapeake Energy is expected to take the same step soon.

Despite the relatively high prices compared to the record decline last April, the US shale oil industry is still quite far from returning to its former era.