An expected drop off in oil production from U.S. shale basins sent crude oil prices soaring in Tuesday trading, with WTI up more than 2 percent.
West Texas Intermediate, the U.S. benchmark, was up more than $1 per barrel in early Tuesday trading to $59.74 per barrel, close to where it started the month. Brent crude oil prices gained 3 percent to sell for $64.60, about 50 cents below the June 1 price.
The U.S. Energy Information Administration said in a drilling productivity report oil production from some of the more lucrative shale basins in the United States is expected to drop by a combined 92,000 barrels per day by July. While the Eagle Ford shale play in Texas is expected to show the largest drop in terms of volume, the Niobrara shale in Colorado declines the most in terms of percent by July, federal data show.
Colorado's crude oil production from 2007-13 rose 146 percent thanks in part to the Niobrara shale reserve area, which holds an estimated 2 billion barrels of oil. Low oil prices, however, are dragging on state economies and, while unemployment rates in Colorado were at levels before the global economic downturn, the Colorado Office of State Planning and Budget said there are elevated concerns about unemployment in parts of the state.
Seven shale basins reviewed by the EIA accounted for 95 percent all the increase in domestic oil production from 2011-13.
A surplus of supplies last year pushed oil prices well below the $100 mark amid signs of a weak global economy. The Organization of Petroleum Exporting Countries said last week it expected demand to pick up during the second half of the year.
