US shale producers halt down-swing in second round of oil rout

US shale producers, have successfully built their image as swing producers since they rapidly reduced active oil rigs by more than 60% beginning in December, 2014 and by mid of this year as oil price dropped from more than $100/barrel in summer of 2014 to just about $40/barrel by first quarter of 2015.

• As price of oil (WTI benchmark) recovered from $40/barrel in March to $60/barrel in June, these swing producers were back adding idle rigs to active mode. By end of July, oil producers in US added about 20 rigs per week, about the same pace of average addition during oil boom.
   
• This time though, US producers haven't yet cut the number of rigs active, in spite of oil dropping from $60/barrel to $40/barrel.

The above situation suggests, that in spite of sharp drop in oil, any sharp decline in production is unlikely to materialize.

The data from US's Energy Information Administration (EIA) provides support to this view.

• Since the rout in oil price, US production has in fact increased from 8.67 million barrels/day to more than 9.5 million barrels/day.

Global overproduction, along with US is likely to continue to act as a hindrance to price recovery.

WTI is currently trading at $41.6/barrel, down -0.6% for the day so far.