Source: RigData RADAR Report | September 8, 2016

There is a puzzling disconnect in how the EIA forecasts unconventional oil production vs. unconventional gas output, according to Platts RigData’s RADAR Report. EIA’s latest forecast of US unconventional gas production calls for it to more than double from 2014 to 2040 even though gas prices will remain, on average, just ~4% higher (in 2015 dollars) over the forecast period than they did on average in 2014. That’s reasonable, says the RigData News & Analysis team.

Since bottoming well below $2/MMBtu in December 2015, Henry Hub has averaged about <$3/MMBtu, and the US gas rig count has plunged by more than -90%, and yet US gas production has jumped by nearly +40%. But EIA projects unconventional oil production will increase by “only” +69% from trough in 2017 to 2040, even though it forecasts an average oil price of $91/bbl for 2014—2040. That price level kept more than 1,000 oil-directed rigs active for at least 3 years and helped produce a nearly fivefold spike in US unconventional oil production.

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