US Shale Outlook Buoyant

Shale oil production in the largest US oilfield should rise by as much as 300,000 barrels per day by December, according to updated forecasts following the industry's latest quarterly results.

The higher outlooks, amid worries the recent breakneck pace of gains may not be sustained, come on the heels of one high-profile Permian Basin producer's oil output miss last quarter and decisions by several other energy companies to trim annual budgets, Reuters reported.

Oil production from the Permian Basin of West Texas and New Mexico is closely watched because its low costs and rapid growth have pressured efforts by the Organization of Petroleum Exporting Countries to drain a global crude supply glut.

Consultancy Wood Mackenzie sees another 300,000 barrels per day coming from Permian projects by the end of the year, raising its yearend forecast by 200,000 bpd.

Rystad Energy, meanwhile, projects output from the Permian will rise by 300,000 bpd in the six months from June to December.

Both expect oil production in the Permian next year will approach or surpass the 2.7 million bpd mark.

"The Permian continues to surprise us to the upside," said Alex Beeker, an analyst at Wood Mackenzie. With US benchmark crude continuing to trade below $50 a barrel, drilling rig additions will slow, but "we also see production continuing to rise", he added.

The robust volume outlooks come as investors sold off shares in a range of Permian shale producers after Pioneer Natural Resources Company earlier this month disclosed an unexpected drop in second-quarter oil production and higher costs on some Permian wells.

A number of oil companies cut their capital spending plans for this year, citing the sub-$50 a barrel price or greater production efficiencies. The number of active US drilling rigs also has slid in the past three weeks, prompting concerns that overall production growth could stall.

Pioneer executives said greater-than-expected natural gas volumes compensated for the lower-than-forecast oil production last quarter. Gas is produced alongside oil in wells. The older a well gets, the greater the percentage of gas it produces. But in Pioneer's case, the high concentration of gas came from brand-new wells, a situation that is not common.

Pioneer insisted it had fixed the problem and would hit future oil targets, but its stock is down about 16% since posting quarterly results. Its swoon dragged down shares of other producers, leaving the S&P Energy index off more than 3% for the month.