As a price-elastic source of supply, U.S. shale production will respond relatively quickly to the steep drop in oil prices. Already U.S. E&Ps are reporting further reductions to their 2020 spending guidance and cutting back on planned drilling activity. A new normal is here, with fiscal discipline and strong balance sheets even more important to weather current and future price volatility. ESAI Energy examined three price scenarios and the impact on shale basin production for the rest of 2020 under each scenario. A decline of somewhere between 170,000 b/d and 1.0 million b/d seems to be in the cards.
A sustained price under $40 will require significant restructuring, with many smaller producers unable to continue operating; bankruptcies will increase. This results in U.S. shale ending 2020 almost 1 million b/d lower than at the start of the year.