US Shale Oil Stares Into Abyss With OPEC Ready To Push It Over -- The [London] Telegraph -- October 8, 2015

From The [London] Telegraph:

Shale drillers in Texas and North Dakota hung on for longer than anyone expected, but are too reliant on crude trading at above $60 a barrel to remain profitable.

To their credit, shale drillers and operators in Texas and North Dakota have hung on for far longer than anyone expected after OPEC launched its pre-emptive oil price war last November. However, a year of oil prices trading at an average of around $50 per barrel is finally succeeding in reversing the dramatic increases in US production that had been so troubling the Gulf’s oil-rich sheikhs.

Total US output has fallen by almost 600,000 barrels per day (bpd) since the end of the first quarter, with the biggest declines occurring recently as operators begin to crack under the financial pressure caused by OPEC’s squeeze on prices. By next year, the US government expects output to decline to an average of 8.6m bpd, down from an average of 9.3m bpd in 2015.

According to Mark Papa, the former head of US shale oil specialist operator EOG Resources, this is just the beginning of the downturn in North America. Speaking at the annual Oil and Money conference in London this week, Mr Papa said: “We are about to see a pretty dramatic decline in US production growth.”

Be sure to parse that last sentence: "We're about to see a pretty dramatic decline in US production growth." The operative word is in bold.

There is no question that this could get really, really nasty ("blood on the streets," as they say in some places), but whenever I read these doom and gloom stories, I think about the following:

• the Chinese, subcontinent Indian, and Indonesian middle class continues to grow, and the middle class loves gas-guzzling SUVs and air-conditioning
• the low price for crude is getting Americans (and the rest of the world) hooked on crude oil again
• Saudi Arabian production is maxed out (discussed numerous times on the blog)
• production in the Mideast may increase -- it may increase significantly -- but nothing is guaranteed
• Russia is now in the Mideast; Russia's presence changes everything
• Russia's economy is on the ropes; we can talk about Ecuador and Venezuela failing due to the low price of oil, but the Russian Bear won't ... fail (one has to ask why Russia went into the Mideast)
• upwards of 50% -- maybe more, I keep forgetting -- of all US oil production comes from onshore
• US onshore production coming from three plays: the Permian, the Bakken, and the Eagle Ford (and the Eagle Ford looks to be lagging due to low crude oil prices)
• off-shore projects have dried up; it will take a decade to get a new off-shore project up and running
• the Arctic was a huge disappointment 

I wonder what an errant cruise missile hitting a Saudi oil field would do to the price of oil? Just asking?

I am inappropriately exuberant about the Bakken. I may be whistling past the graveyard. But I don't think Genie Energy went looking for oil in the Golan Heights because they thought oil was "dead."

By the way, this is a cool essay by Boone Pickens ... cool because he talks about D-Day/Normandy. I am reading Stephen Ambrose's D-Day and have recently blogged about it.  I feel bad for Boone Pickens: Washington politics must give him a lot of heartburn.