Is This The Next Big Headache For Oil Prices?

Oilprice.com ^ | 25-07-2016 | Nick

[bananaman22]

When oil analysts look at the markets to try to get a sense of where oil prices are heading, one of the great unknowns, at least in the U.S. shale industry, is the large volume of drilled but uncompleted wells (DUCs). As oil prices began collapsing two years ago, shale drillers increasingly decided to defer the completion of their drilled wells, hoping to wait out the downturn and bring production online at a later point when prices rebounded.

But with oil prices suffering from a prolonged downturn, the DUCS began to mount, leaving a huge backlog of potential production that was yet to come online. From the point of view of the nascent and fragile oil price recovery (or more accurately, several cycles of recovery in the past year or so), the DUCs threatened to kill off the price rally, as they would bring a flood of new production online right when prices rose high enough.

[Elderberry]

The rush of new output will stop U.S. oil production from falling any further, stabilizing output at some point later this year. But there is another way of looking at such a scenario: The fracklog will no longer loom over the market, a bearish variable that could always trigger another price downturn. With the DUCs completed, the onus will be on oil companies to find and drill new wells, a much taller task than simply completing already-drilled wells.

My Son is in Oklahoma, supporting drilling. They are now only drilling 2 wells per pad. When the DUC's are completed and after the oil companies have drilled on each of their leases, they can drill on the unutilized pad spaces.

[Sam Gamgee]

I am puzzled actually that oil demand continues to rise 1 0r 2% on average per year, considering the whole world is mired in recession.