Shale Revolution Quelled? | Russell T. Rudy Energy LLC
A recent article in “World Oil” references the U. S. Energy Information Administration (EIA) prediction that tight oil production will decline by 57,000 barrels of oil per day (bopd) in May.
With prices at a 6 year low, and the oil rig count cut in half, both Deutsch Bank AG and Goldman Sachs see at least a temporary halt in production growth. However, this will lead to a reduction of the current oil glut and ultimately to price recovery.
Ironically, a decline in domestic oil production is predicted as U. S. refineries end their seasonal maintenance and start processing more crude. This uptick in refining activity should help reduce the largest oil surplus since 1930.
However, even with increased refinery runs and decreased domestic production, any price relief might be short-lived. Consulting firm Wood Mackenzie estimates that there are currently over 3,000 DUC’s (drilled but uncompleted wells) which only need to be fracked to start producing. Adam Longson with Morgan Stanley observed that “A backlog of uncompleted wells, falling service costs, hedging opportunities and plenty of capital on the sidelines should all support investment, perhaps more than the market expects.”
To read the article in its entirety, please go to http://www.worldoil.com/news/2015/4/13/shale-oil-boom-seen-ending-in-may-following-price-collapse-eia .
