Today I discuss the factors that brought oil prices so far down and more recently back up.

World oil production was essentially stagnant for seven years beginning in 2005. Field production of crude oil averaged 73.9 million barrels a day in 2005 and averaged 74.7 mb/d in 2011.

Monthly world field production of crude oil in thousands of barrels per day, Jan 1973 to Nov 2015. Vertical line at Jan 2012. Data source: Monthly Energy Review.

That plateau was followed by a dramatic surge in world production of 3.1 mb/d between January 2012 and January 2015. More than all of that increase can be accounted for arithmetically by the 3.2 mb/d increase in U.S. production, spurred by horizontal fracturing of shale formations. Net production outside the U.S. actually decreased 100,000 b/d during these 3 years, though far from uniformly across producing countries, with 800,000 b/d increases each from Iraq and Canada helping to offset production declines in places like Libya, Iran, and Mexico.

Monthly U.S. field production of crude oil in thousands of barrels per day, Jan 1973 to Nov 2015. Data source: Monthly Energy Review.

U.S. production continued to rise in the first few months of last year, but fell almost 400,000 b/d between March and November to end the year about where it began. The EIA’s Drilling Productivity Report model predicts that field production from the major U.S. shale plays will have fallen another 400,000 b/d from November values by April. Last week the Wall Street Journal passed along this assessment:

In the Bakken Shale region, prices will need to be above $60 for benchmark West Texas Intermediate crude for at least three months before the area sees a meaningful uptick in drilling activity, said Lynn Helms, Director of North Dakota’s Department of Mineral Resources.

Actual or expected average daily production (in million barrels per day) from counties associated with the Permian, Eagle Ford, Bakken, and Niobrara plays, monthly Jan 2007 to Apr 2016. Data source: EIA Drilling Productivity Report.