Biggest Story In The US Oil Sector Right Now: Lack Of Adequate Permian Takeaway Capacity -- For Both Crude Oil And Natural Gas -- Bad For Texas; Bad For US Shale Operators; Terrible News For Saudi Arabia; Permian Likely Produced A Record 3.1 Million BOPD In March; Texas Is About To Have A Flaring Problem -- April 5, 2018

The data points from the stories below:

• in the Permian: too much oil, too much natural gas -- not enough pipeline
• Permian crude oil production probably hit a record 3.1 million bopd in March (2018)
• some operators in the Permian could be in a world of hurt -- they paid too much to enter the Bakken and may not be able to produce as much as they are capable of producing 
• no one saw this coming. Why? Who ever thought there would not be enough pipe in Oklahoma or Texas 
• price of WTI is going to trend lower

Right now, in the US crude oil sector, it's hard to find a bigger story than what's going on in the Permian right now. RBN Energy posted a blog on it yesterday/today (paying subscribers get RBN Energy blogs a day earlier than the rest of us).  

Reuters, six hours ago, reported: Texas oil output surge clogs pipelines, depresses prices. Go to twitter and search Permian oil pipelines and you will see how bad this has gotten. This is going to be a huge, huge problem before it gets better.

I argued some months ago that many operators may have overpaid to get into the Permian. At its height (and maybe still going on) operators paid upwards of $80,000 / mineral acre in the Permian. And now, those operators have to drill as fast as they can to start showing a return on their investment. Something tells me this is not going to end well for some operators.

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on anything your read here or think you may have read here.

The Permian:

The linked Reuters story is late to the game. But here are some excerpts:

The Permian basin in Texas is leading the way as U.S. oil production has reached an all-time high, but the prolific output is causing bottlenecks as pipelines transporting the crude have filled up more quickly than expected. 

That has depressed prices there, posing a threat to future production, while providing a boost to pipeline companies as the lines have filled to near-capacity.

With few new pipeline projects scheduled for this year, producers may be forced to slow drilling, or even shut in active production.

The problem illustrates the snags that can arise in transporting crude to the U.S. Gulf Coast as oil prices have rebounded to more than $60 a barrel and companies have reduced costs to make drilling more profitable in the Permian. 

Production there is estimated to have hit a record 3.08 million bpd in March, nearly a third of overall U.S. production of 10.4 million bpd, according to the Energy Information Administration (EIA). Permian drillers are branching out into relatively less-profitable areas of the region, said John Zanner, energy analyst for RBN Energy.  

From Dallas News: oil-rich Permian Basin has a Texas-sized natural gas problem.

A pipeline shortage that's leaving gas trapped in West Texas' Permian Basin means prices for the fuel there are the lowest of any major U.S. hub, wresting that distinction from Appalachia's Marcellus Shale. 

Prices for Permian gas, produced alongside oil in the play, have tumbled 30 percent from a year ago, while output rose to a record. And the pipeline crunch is also pummeling the region's oil market.

All that gas production is creating a dilemma for drillers, who may be forced to curtail oil output if they can't get their gas to market. Producers can burn off some of the gas -- a process known as flaring -- but state regulators typically won't allow that to happen indefinitely. And as mild spring weather limits demand for the heating fuel, explorers may be giving their gas away, according to broker Ion Energy Group LLC.

A takeaway problem was a huge story for the Bakken during the boom, but did not get a lot of national attention for a number of reasons.

The takeaway problem for the Permian is going to be a problem much bigger than the Bakken takeaway problem.

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Music Video Break

This reminds me of the late 1960's / early 1970's when I hitchhiked. I hitchhiked often, including three cross-country trips, twice from the west coast to the Dakotas and once from the east coast to Williston, North Dakota.  

Looking back now, it's hard to believe how much hitchhiking I did. Rarely a big rig would stop to give me a lift.

Phantom 309, Red Sovine