U.S. PRODUCTION ON TRACK FOR FIRST TWO-MONTH DECLINE SINCE 2022 AS OPERATORS DIAL BACK SHALE DRILLING

(Bloomberg) –U.S. shale expansion has come to an end for now with production set to shrink for a second straight month in September, according to a government report.

After topping out with record crude production in July, the U.S. is on track for its first two-month decline since January 2022, according to a Monday report by the U.S. Energy Information Administration. The drop is led by the Permian basin in West Texas and New Mexico, where output will fall for a third month to 5.8 MMbpd, its lowest level since February. The Permian had been the last of the four U.S. shale basins to drive growth in overall U.S. production.

The decline will add more tightness to global supplies, which are slipping in the wake of production cuts from Saudi Arabia and its OPEC allies. Meanwhile, the International Energy Agency said Friday that global oil demand has reached a record and warned that oil prices could climb further.

Operators have been dialing back U.S. activity as growth in global oil demand returned slower than executives thought it would. The slowdown is also being driven by closely held operators that are running out of inventory for drilling new wells. The oil rig count has fallen 15% so far this year.

Oil producers also continue to drive the fraclog lower as completion activity outpaced drilling in July, according to the drilling productivity report. The last time operators added to the supply of drilled wells waiting for frac crews was in December. The lower the count goes, the longer it will take for shale supply to return.