LONDON - Crude oil production data published by the state of North Dakota on Friday contained something for both bulls and bears.
Bears can point to the unexpected resilience of shale production in the face of lower oil prices while bulls can point to the fact that production is no longer growing after five years of tremendous gains.
The state pumped an average of 1.2 million barrels per day (bpd) in May, an increase of 32,000 bpd compared with April, according to the Department of Mineral Resources (http://link.reuters.com/kan25w).
Production remained steady with an average of just 80-90 rigs drilling in May, far fewer than the 120-130 rigs the department forecast at the start of the year would be necessary to maintain 1.2 million bpd.
By concentrating remaining rigs on the most productive parts of the Bakken and raising efficiency, the state's drillers have steadied output with fewer than half the rigs employed last October.
But production has been essentially flat for the last nine months, bringing to an end the explosive output increases that had been reported for much of the previous seven years.
State output has risen by an average of just 0.2 percent per month for the last six months, down from 3.3 percent per month in the half-year to September 2014, and the slowest rate for six years.
The slowdown has been the longest and deepest "pause" in the state's oil boom since the start of the shale revolution.
Whether the data is bearish or bullish for oil prices is a bit like asking whether a beer glass is half full or half empty; it all depends on perspective.
For bears, production is not falling by as much as expected, even though prices have plunged and the number of rigs drilling in the state has fallen by 60 percent since October.
Shale producers have demonstrated their resilience in the face of wellhead prices of less than $50 per barrel, just half what they were earning a year ago.
If further reductions in shale output are needed to rebalance the global oil market, wellhead prices will have to go even lower.
For bulls, shale, which provided almost all the marginal increase in global supplies over the past five years, has stopped growing at $50 per barrel.
Zero growth would remove one important source of oversupply and, coupled with continued growth in fuel consumption, promote a gradual return to balance in the global market.
The critical question is whether mere stabilization, or a slowdown in the rate of growth, will be enough to rebalance the market over the next 12-18 months.
Some shale drillers are already talking about adding extra rigs again and growing output in 2016, though there is little sign of this so far.
Pioneer Natural Resources told investors on July 8 it would add two more rigs per month through the rest of 2015 in Texas provided the oil price "remains constructive."
Baker Hughes data shows the number of rigs drilling for oil across the United States has risen slightly in each of the last two weeks, after 29 consecutive weeks of decline. But the increase is very small so far (http://link.reuters.com/qag25w).
Critically, North Dakota's own records show that the number of rigs drilling in the state has remained basically unchanged in recent weeks at 70-75 , about 10 fewer than in May.
In any case, there is an element of bravado in pronouncements from independent shale producers who must convince investors their business model is sustainable even with much lower prices.
It remains unclear what price level producers need to start growing output again. Pioneer said only that oil prices needed to remain "constructive." Others have suggested they would be able to increase production if prices went above $70.
Since the start of the month, however, U.S. oil prices have fallen more than $6 per barrel, 11 percent, to just $52 per barrel and some analysts think they will far further in the coming months, which could prompt the shale firms to cancel plans for more rigs.
Now that shale producers have become the marginal suppliers to the market, drilling, production and prices will all be co-determined.
Strong resumption in shale output growth would likely require higher oil prices, while lower prices will leave shale growing only slowly if at all.