US shale may not effect oil prices to the negitive 01:48 PM EDT, 05/01/2018 (MT Newswires) -- The massive rise in U.S. oil production could slow as supply growth from the Permian Basin in Texas eases on tight pipeline access and less productive geology, a commodities analyst said Tuesday, potentially pushing oil prices, now trading near 40-month highs, higher still.
Martin King, director of institutional research at GMP FIrstEnergy, said in a Calgary presentation that Permian costs are rising as producers move to tap less prolific tier two and three geology in the basin and the number of drilled, uncompleted wells rise due to a lack of completion crews.
Coupled with a lack of pipeline space forcing producers to more expensive truck or rail options, the constraints could check growth from the area that has contributed the lion's share of the 1.3 million barrel per day rise in U.S. oil production over the past year and cut supply in a market where demand is still on the upswing.
"The (drilling) rig count is starting to move sideways in the Permian and they're starting to work their way to tier two and three geology," King said. "If you start getting into less-productive rock you have to beat on it harder with more rigs ... so if they're going to maintain (supply growth) momentum they need more rigs and to get more rigs they need higher prices.