Oil Futures Mixed Early Wednesday

WASHINGTON, D.C. (DTN) -- New York Mercantile Exchange oil futures nearest delivery and Intercontinental Exchange Brent futures moved mixed in early trading Wednesday amid continued uncertainty over U.S./China trade talks, while reports indicate a slowdown in tight drilling activity in the United States in 2019 lent modest upside support.

In midmorning trade Wednesday, Nymex March West Texas Intermediate futures shifted $0.10 lower to $52.91 barrels (bbl) while ICE March Brent was up $0.07 to $61.57 bbl. Nymex February ULSD futures lost 0.65 cents to $1.8946 gallon, while February RBOB futures shed 1.28 cents to $1.3887 gallon.

The Energy Information Administration reported Tuesday it expects tight shale oil production in seven key U.S. producing regions to increase by a modest 62,000 barrels per day (bpd) from this month to average 8.179 million bpd in February, the lowest growth rate in nine months. According to EIA’s monthly Drilling Productivity Report, output from the Permian Basin will increase by 23,000 bpd with production averaging 3.854 million bpd in February, while Eagle Ford Region production is forecasted to grow 11,000 bpd to 1.438 million bpd. Bakken Region oil production is projected to grow by 9,000 bpd to an average of 1.418 million bpd in February.

According to Financial Times analysis of the latest EIA forecast, the rise of about 500,000 bpd from December 2018 to December 2019 would represent a sharp slowdown from the growth of 1.8 million bpd over the previous 12 months.

Financial Times report also noted that capital raising by U.S. oil companies has fallen sharply in recent months, noting the U.S. exploration and production sector has not had a single bond sale since November, suggesting a weaker growth rate in 2019.

The outlook follows Friday’s data from Baker Hughes showing the U.S. oil rig count dropped 21 last week to 852 rigs, registering the biggest one week drop in oil rigs in three years.

Despite the forecast for weaker U.S. shale growth, International Energy Agency Executive Director Fatih Birol said during an interview this week at Davos, Switzerland that, “a huge amount of pipeline capacity is coming in the Permian, so U.S. oil industry will be able to react to the market much faster and bolder now. We will see huge implications of shale for both oil and gas for many years to come.”

Liubov Georges can be reached at liubov.georges@dtn.com