The price war has reduced production by around 150,000 bpd compared with this more conservative baseline See Figure 2).
So the impact of the price war on U.S. shale output could be estimated at anything between 150,000 bpd and 1.6 million bpd.
Shale proved far more resilient than almost anyone thought possible as producers concentrated drilling and expenditure on the most promising areas, accelerated drilling times and optimized fracturing operations.
The result is that the Saudis have been forced to push prices much lower for much longer than they anticipated to defend their market share and rebalance the market.
Winning, But At A Cost
The effort may finally be paying off as a result of the latest downward lurch in prices. The U.S. shale industry finally appears to have reached a tipping point where output is contracting rather than just flat-lining.
The EIA has revised its projection for end-2016 output down from 9.7 million bpd in July 2014 to just 8.5 million bpd in February 2015 ("Short-Term Energy Outlook," EIA, July 2014 and February 2015).
Low prices are expected to remove another 800,000 bpd from the market by the end of this year. Even that may prove to be too low because the EIA's forecast is conditioned on WTI recovering to $43 by end-2016.
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