How the Energy Information Administration guestimates keep oil prices subdued

More importantly, if the US is actually producing much less than the market thinks, there is a much stronger bullish case for oil than conventional wisdom dictates. After all, there are massive shale production gains from the US baked into oil price forecasts. For example, the EIA sees US oil production surging from 9.3 mb/d this year to 9.9 mb/d in 2018, a gain of 600,000 bpd.

But the problem is that not only will it be difficult to reach that 9.9 mb/d, but it now looks like an uphill battle for the US to reach that 9.3 mb/d figure in 2017. For the first six months of this year, the US only averaged 9.071 mb/d. It will have to seriously ramp up production in order to reach that 9.3 mb/d estimate for the full-year. In reality, that looks very unlikely.

That means that ramping up to 9.9 mb/d next year would also appear out of reach, particularly since the shale industry seemed to stall out this summer. Production actually fell from May to June; the rig count has plateaued; some shale companies are already reporting some problems; the lingering effects of Hurricane Harvey will likely impact shale growth rates for months to come (although refinery outages are bearish in the near-term); and sub-$50 WTI prices will keep shale companies from recklessly spending more than they already are.

In short, the US shale industry is on track to disappoint, which would mean there is a lot of upside risk to oil prices.