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US Shale Oil Productivity Impacts the US and Global Oil Market

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US shale oil production 

US shale oil production rose between 2007 and April 2015, according to the U.S. Energy Information Administration’s monthly Drilling Productivity Report. The record US crude oil production was due to the mammoth surge in shale oil production in 2015. The surge in tight oil, or shale oil, was due to the rise in initial production rates from the new wells. It simply means that the new wells, or crude oil rigs, in 2015 produced more barrels in the first months compared to meagre production in 2007. Improved drilling techniques and technology led to the record surge in oil during the initial months of new well production in 2015. The following chart shows the crude oil production of new rigs during the initial months in the Permian Basin.

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Production regions

The key shale regions in the US are the Bakken, Eagle Ford, Niobrara, Permian, Utica, Marcellus, and Haynesville, respectively. Out of these seven shale regions, the Bakken, Eagle Ford, Niobrara, and Permian are the four major shale crude oil producing regions. The rise or fall in drilling activity impacts oilfield equipment companies like National Oilwell Varco (NOV), Schlumberger (SLB), Halliburton (HAL), and Baker Hughes (BHI).

Productivity 

The Eagle Ford and Bakken shale regions had crude oil production of more than 400,000 bpd (barrels per day) from the average new wells in 2015. Similarly, the Permian and Niobrara shale regions had crude oil production of more than 200,000 bpd from the average new wells in 2015.

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Impact on the oil market

The rise in crude oil production from average new wells in 2015, despite lower oil prices, led to the rise in crude oil production. It’s extending the crude oil bear market. Read more about US drilling productivity and US crude oil production in the next part of the series. The rise in crude oil production from the regions where the old wells existed will continue to put pressure on oil prices, oil producers, and oil and gas ETFs. This trend continued for nine straight years in the shale regions.

ETFs

The ups and downs in the oil market impacts ETFs like the VanEck Vectors Global Oil Refiners Index (CRAK), the ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the SPDR S&P Oil & Gas Equipment & Services ETF (XES), the VanEck Vectors Oil Services ETF (OIH), and the Vanguard Energy ETF (VDE).

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