North American shale supply will continue growing even in an environment with lower oil prices, Rystad Energy forecasts.

The OPEC countries and Russia are meeting in Austria’s capital, Vienna this week to agree on oil production quotas for 2020. Without deeper cuts, Rystad Energy forecasts a substantial build of global crude stocks and a corresponding drop in oil prices (link).
However, even with potentially lower prices, the production outlook for North American shale appears robust in the years ahead.
Despite the continued decline in the number of horizontal rigs since the beginning of 2019, we have not observed a significant fall in the number of spudded wells. At the same time, shale investments have declined by 6% to around $129 billion in 2019, and are expected to fall another 11% in 2020 due to the industry’s focus on cash flow discipline and free cash flow generation.  This means the industry will lower its total investments for two subsequent years –a development we haven’t seen since the oil price crash in 2014.
“In spite of the decline in spending and activity levels, the North American shale supply is not following the downward trend,” says Sonia Mladá Passos, a product manager of Rystad Energy’s Shale Upstream Analysis team.

In Rystad Energy’s base-case price scenario*, the North American light tight oil (NA LTO) supply will reach 11.6 million barrels per day (bpd) by 2022. This implies an annual growth rate (CAGR) of 10% from 2019 to 2022.
In a price scenario with the West Texas Intermediate (WTI) oil price remaining flat at $45 per barrel, the NA LTO supply would plateau at 10.1 million bpd towards 2022.
“The flat development of US LTO production is also possible in lower price scenarios, but we would likely see an initial period of multi-quarter production decline, with output stabilizing at a lower level,” Mladá Passos remarked.
The Light Tight Oil (LTO) supply from North American shale is set to reach 8.6 million bpd in 2019. Nearly 93% of this supply is driven by the US; only slightly more than 600,000 bpd of LTO is produced in Canada.

In 2019, the industry remains on track to spud around 17,000 horizontal wells targeting shale formations in the US and Canada. Going forward, Rystad Energy expects drilling activity to remain relatively flat at around 17,000 spudded wells per year, on average, according to our base-case price scenario.
However, in a low price scenario with the WTI price remaining flat at $45 per barrel, activity in North American shale may begin sharply decreasing, falling by 26% in 2020 year-on-year.