The US shale patch recovery has been a rocky road and now is facing more challenges, unlike anything they have seen before.  As oil prices reached the highest level since October 2018, The Energy Information Administration (EIA) reported that US shale oil production increased by 38,000 barrels a day in July. That puts US shale oil production back to 7.8 million barrels a day which is the highest we have seen since last November. Finally, we are starting to see some signs of life in the US shale patch but it is still a shadow of its former self and is still under fire by the Biden administration and the green movement.

Not only does shale have to try to increase output to meet demand, the sector also has to deal with a lack of investment dollars that are being diverted elsewhere because of climate change fears. There is still a shockwave surrounding a Reuters report that, “Royal Dutch Shell is reviewing its holdings in the Permian Basin, which accounted for around 6% of the company’s total oil and gas output last year. The holdings could be worth more than $10 billion. The company lost a lawsuit and is under major pressure to cut carbon emissions.

This pressure is also on the back of investors that are turning away from fossil fuels. US shale producers have shown restraint partly because their shareholders are pressuring them to show a profit and because of the lack of investment. Fossil fuel investment has become unpopular and that is going to harm the US and global oil production. The push to become more green and more carbon neutral is forcing investment dollars away from the oil and gas sector which is putting the global oil market on the path to an energy crisis.

Argus reports, “Climate activists aiming to stop new oil and gas drilling in Norway’s Arctic territory are taking the issue to the European Court of Human Rights. Environmental groups Greenpeace Nordic and Young Friends of the Earth Norway alongside six activists have filed an application to the court arguing that Norway has breached fundamental human rights by allowing new oil drilling amid a climate crisis. In December, the Supreme Court of Norway dismissed their attempt to halt oil exploration in the Arctic.

Their latest effort follows a Dutch court ruling last month that ordered Shell to sharply reduce its CO2 emissions this decade, and a scenario published by the IEA warned that new fossil-fuel investments must stop if the world is to stand a chance of cutting net emissions to zero by 2050.

Norway’s oil policy has drawn criticism from politicians and climate activists who say the country’s approach is at odds with its drive to cut emissions. Last year the Norwegian parliament approved fiscal stimulus measures for the oil industry to spur spending and protect jobs. And only last week the Norwegian government published a white paper that showed no change to oil policy, although there was an increased focus on renewables.” The petroleum sector will remain a significant factor in the Norwegian economy in the years to come, although not on the same scale as today,” the government said. “The government will facilitate long-term economic growth in the petroleum industry within the framework of our climate policies.”

Russia is more confident that oil prices will stay strong. Russia raised the import duty on oil on July 1st to 61.5.

Natural gas is on a roll! The EIA did report that, “Natural gas production from the major shale basins was expected to increase for the first time in four months, according to EIA’s drilling productivity report going back to 2007 Reuters. Total gas output will increase by less than 0.1 billion cubic feet per day (bcfd) to 84.3 bcfd in July. That compares with a monthly record high of 86.6 bcfd in December 2019. Still not enough to cool this red hot market.

Thanks,
Phil Flynn

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