NEW YORK: The US oil industry pumped less crude than initially estimated this year, according to new government data that offered the clearest look yet at the impact of drillers’ retrenchment in response to collapsing prices.

The downward supply revisions were “unambiguously” bullish for a global market awash with oil, said Credit Suisse global energy economist Jan Stuart, suggesting the oft-cited resilience of US shale producers to lower crude prices might have been overstated.

The Energy Information Administration (EIA) said its new survey-based output data showed the United States pumped a hair below 9.3 million barrels per day in June, down by 100,000 bpd from a revised May figure. The June figure was also nearly 250,000 bpd below what the EIA had estimated a few weeks ago.

The EIA also revised production data for the first five months of the year based on an expanded monthly survey of operators that includes crude oil and lease condensate for the first time.

As a result, output in the months of February, March and May was about 100,000 bpd less than previously reported, according to the agency’s detailed breakdown.

An earlier EIA blog had said monthly data was revised down as much as 130,000 bpd, without providing any specific figures for the individual months.

Until now, the agency’s monthly production figures were primarily based on individual states’ data, which was often incomplete or with a months-long delay, as well as some third-party figures and agency modelling.

While the report sheds new light on the global oil glut that has walloped prices this year, it did little to change the broader narrative. The data showed that output peaked in April before entering a sequential decline as months of deep cuts to drilling rigs finally put the brakes on the shale boom.

The revision is a “a rounding error” in the 94m bpd global oil market, cautioned Rapidan Group President Bob McNally.

Still, the rate of that decline was somewhat sharper than the agency had been anticipating. Earlier this month, the EIA’s monthly Short Term Energy Outlook had forecast June output would show a slight rise to 9.54m bpd.

“To the degree that fundamentals matter, these data appear unambiguously constructive,” said Stuart.

US oil prices sharply reversed early-morning losses as traders digested the new data, with US crude up more than 3 per cent by 11:42am EST (1542 GMT), adding to a nearly $7 rise on Thursday and Friday.

As oil traders began searching this year for any sign of a slowdown in booming US shale production that could stem a deep rout in prices, the EIA’s data became a topic of sometimes fierce debate. Some analysts suggested the agency was significantly underestimating the rate of production.

Thus far, many analysts have been surprised at the apparent resilience of the shale industry.

While oil prices have tanked to more than six-year lows, energy companies have rushed to employ cheaper, more-efficient drilling techniques and target the richest shale seams, helping sustain output.—Reuters

Published in Dawn, September 1st, 2015

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