Goldman Says Maturing Permian To See Slower Crude Oil Supply Growth

The latest Drilling Productivity Report from the EIA, released yesterday (February 13, 2017), shows that while the combined rig count in the seven major U.S. shale plays rose about 25% in the fourth quarter of 2016 versus the previous quarter, and the number of wells drilled was up 29%, well completions were up a paltry 1%, leading to an increase in the inventory of drilled-but-uncompleted wells (DUCs). Completions accelerated a bit in January 2017, but DUCs still continued to rise. That certainly seems counterintuitive.  With crude oil prices stable in the low $50’s over the past few months you might think that producers would be pulling DUCs out of inventory, and in fact there have been statements to that effect in several producer investor calls. This is not just an exercise in energy fundamentals numerology. If the DUC inventory is increasing, then production will not be ramping up as fast as the growing rig count would imply. But what if, as some early signs indicate, the historical relationships are out of whack and the DUC inventory isn’t growing but rather declining? In that case, forecast models could be understating the outlook for production growth, and the market could be in for a more rapid and steeper rebound in oil and gas production than many expect. In today’s blog, we delve into the DUC inventory data and its potential upside risk to production forecasts.

Producers in the Haynesville Shale had anticipated that growth in LNG exports in 2024 would goose prices and propel the play’s role as a crucial source of LNG feedgas. Instead, lackluster demand, exacerbated by delays at the Golden Pass LNG project, contributed to lower-than-expected natural gas prices, which caused some producers to scale back drilling plans and trimmed Haynesville production from about 16 Bcf/d in the first half of 2023 to less than 14 Bcf/d by the end of 2024. So, what do they have planned for 2025? In today’s RBN blog, we’ll discuss the Haynesville’s promise and challenges and highlight what E&Ps there are planning. 

Crude oil prices continued to increase this week, with WTI at Cushing closing Tuesday at $84.65/bbl, the highest level since October 13, 2014. The rise in crude since the spring of 2020 has been swift and almost relentless, interrupted only by pauses at $40, $60, and $70, when the market took breathers and seemed to say to itself, “We’re not done yet, right?” The question now is, can anything stop WTI from topping $90 and yes, the magic $100 mark — something that few would have predicted we’d see again so soon . The reality is, there are many factors driving crude prices higher but few holding prices down. In today’s RBN blog, we discuss what’s driving the rapid run-up in oil prices, whether $100/bbl WTI is a sure thing, and what happens if — when? — oil hits triple digits.