US shale goes from boom to bust with record declines

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Getty Images

The shale boom once enjoyed by America isn’t living up to its name anymore. Overwhelming amounts of reports reveal that the boom is quickly becoming a bust. This month the production of natural gas that occurs in seven U.S. shale deposits will drop once again. This drop will mark the fourth straight month that production has declined. It is projected that in October deposits will average 44.784 billion cubic feet a day. According to the Energy Information Administration, these levels haven’t been this low since March of this year. Furthermore, this data also shows that this will be the longest streak of declines since 2007.


Source: Energy Information Administration

The shift in supply is being attributed to a surge in gas production that sent prices down to record lows. The Eagle Ford Shale, which is one of the richest oil deposits, is forecasted to see big declines in the upcoming months. This is evident by the idle rigs not in use due to the drop in crude prices. There is another factor damaging the industry that comes in the form of constraints in Appalachia. These pipeline constraints are causing the Marcellus shale to fall 0.5 percent. This drop may seem insignificant however it is taking place at one of the biggest oil fields in the U.S. Analysts forecast that supply will fall short of demand in 2016. Some Bank of America analysts has stated that the total output in the lower 48 states will decrease around 0.3 billion cubic feet in 2016.


Analysts from Morgan Stanley are quick to point out other production issues that have been taking place recently. They specifically bring attention to limited pipeline capacity in the Marcellus region as a growing problem for the industry. Another EI Creative cropobservation they make is that incomplete wells have increased about 50 percent in the first part of the year. The analysts also have concerns over pipeline expansions that are being delayed.

A look at the marketplace reveals that gas has been trading in a more narrow range on the New York Mercantile Exchange. Meanwhile, futures have dropped 30 percent in 2015. Gas prices for October are projected to rise 0.4 percent to $2.76. Analysts concerned with financial pressures to produce is still growing. Time will tell how well producers can stay afloat during the downturn currently being faced in the oil and gas industry.

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